CONFLICT-OF-INTEREST POLICY [ORGANIZATION NAME] A [STATE] Nonprofit Corporation Adopted by the Board on [Month Day, Year] =============================================================================== HOW TO USE THIS TEMPLATE - Fill in every [BRACKETED] placeholder with your organization's details. - This policy is written in the spirit of the sample policy the IRS publishes in Appendix A of the Form 1023 instructions, in plain language a volunteer board can use. Keep the disclosure, recusal, and documentation steps intact — they are what protect your tax-exempt status. - Have an attorney in your state review it before you adopt it, and adopt it by a recorded board vote. - This is a general template, not legal advice (see the footer). =============================================================================== ARTICLE I — PURPOSE The purpose of this conflict-of-interest policy is to protect the interest of [ORGANIZATION NAME] (the "Organization") when it is contemplating entering into a transaction or arrangement that might benefit the private interest of an officer or director of the Organization, or might result in a possible excess-benefit transaction. This policy is intended to supplement, not replace, any applicable state and federal laws governing conflicts of interest for nonprofit and charitable corporations. ARTICLE II — DEFINITIONS 1. Interested Person. Any director, officer, or member of a committee with board-delegated powers who has a direct or indirect financial interest, as defined below, is an interested person. 2. Financial Interest. A person has a financial interest if the person has, directly or indirectly, through business, investment, or family: a. an ownership or investment interest in any entity with which the Organization has a transaction or arrangement; or b. a compensation arrangement with the Organization or with any entity or individual with which the Organization has a transaction or arrangement; or c. a potential ownership or investment interest in, or compensation arrangement with, any entity or individual with which the Organization is negotiating a transaction or arrangement. "Compensation" includes direct and indirect remuneration as well as gifts or favors that are not insubstantial. "Family" includes a spouse, parents, children, siblings, and the spouses of those persons. A financial interest is not necessarily a conflict of interest. A person who has a financial interest may have a conflict of interest only if the Board decides that one exists, under Article III. ARTICLE III — PROCEDURES 1. Duty to Disclose. In connection with any actual or possible conflict of interest, an interested person must disclose the existence of the financial interest and be given the opportunity to disclose all material facts to the Board and any committee considering the proposed transaction or arrangement. 2. Determining Whether a Conflict Exists. After disclosure of the financial interest and all material facts, and after any discussion with the interested person, the interested person shall leave the meeting while the determination of a conflict of interest is discussed and voted upon. The remaining Board or committee members shall decide whether a conflict of interest exists. 3. Procedures for Addressing the Conflict. a. The interested person may make a presentation, but after that presentation shall leave the meeting during the discussion of, and the vote on, the transaction or arrangement that results in the conflict. b. The chair shall, if appropriate, appoint a disinterested person or committee to investigate alternatives to the proposed transaction. c. After exercising due diligence, the Board or committee shall determine whether the Organization can obtain a more advantageous transaction or arrangement from a person or entity that would not give rise to a conflict. d. If a more advantageous transaction is not reasonably attainable, the Board or committee shall determine by a majority vote of the disinterested directors whether the transaction is in the Organization's best interest and is fair and reasonable. It shall make its decision as to whether to enter into the transaction in conformity with that determination. 4. Violations of the Policy. a. If the Board has reasonable cause to believe a member has failed to disclose an actual or possible conflict, it shall inform the member of the basis for that belief and afford the member an opportunity to explain. b. If, after hearing the response and making further investigation as warranted, the Board determines the member has failed to disclose an actual or possible conflict, it shall take appropriate disciplinary and corrective action. ARTICLE IV — RECORDS OF PROCEEDINGS The minutes of the Board and of any committee with board-delegated powers shall contain: 1. the names of the persons who disclosed or otherwise were found to have a financial interest, the nature of the financial interest, whether the Board determined a conflict of interest existed, and the Board's decision as to whether a conflict in fact existed; and 2. the names of the persons present for the discussion and votes relating to the transaction, the content of the discussion (including any alternatives considered), and a record of any votes taken. ARTICLE V — COMPENSATION 1. A voting member of the Board who receives compensation, directly or indirectly, from the Organization for services is precluded from voting on matters pertaining to that member's compensation. 2. A voting member of any committee whose jurisdiction includes compensation and who receives compensation from the Organization is precluded from voting on matters pertaining to that member's compensation. 3. No person who receives compensation from the Organization, whether a voting member or not, is prohibited from providing information to the Board or a committee regarding compensation. ARTICLE VI — ANNUAL STATEMENTS Each director, officer, and member of a committee with board-delegated powers shall annually sign a statement that affirms the person: 1. has received a copy of this conflict-of-interest policy; 2. has read and understands the policy; 3. has agreed to comply with the policy; and 4. understands the Organization is a charitable organization and, to maintain its federal tax exemption, must engage primarily in activities that accomplish one or more of its tax-exempt purposes. The signed statements shall be kept on file with the Organization's records. ARTICLE VII — PERIODIC REVIEWS To ensure the Organization operates in a manner consistent with its charitable purposes and does not engage in activities that could jeopardize its tax-exempt status, the Board shall conduct periodic reviews. The reviews shall, at a minimum, consider: 1. whether compensation arrangements and benefits are reasonable, based on competent survey information, and the result of arm's-length bargaining; and 2. whether partnerships, joint ventures, and arrangements with other organizations conform to the Organization's written policies, are properly recorded, reflect reasonable investment or payments for goods and services, further charitable purposes, and do not result in inurement or impermissible private benefit. ------------------------------------------------------------------------------- ANNUAL DISCLOSURE STATEMENT (attach / circulate yearly) Name: ____________________________ Role: ____________________________ I have received, read, understand, and agree to comply with the Conflict-of-Interest Policy of [ORGANIZATION NAME]. Do you (or a family member) have any financial interest that could give rise to a conflict of interest? [ ] No [ ] Yes — describe below: _______________________________________________________________________________ _______________________________________________________________________________ Signature: ____________________________ Date: ____________________ ------------------------------------------------------------------------------- ADOPTION This Conflict-of-Interest Policy was adopted by the Board of Directors of [ORGANIZATION NAME] on [Month Day, Year]. _______________________________ _______________________________ [Name], President / Chair [Name], Secretary =============================================================================== NOTES FOR CHURCHES A church is a 501(c)(3), so this policy applies to a congregation too. Whether your board is called trustees, elders, a vestry, a session, or a deacon board, those people are the Organization's directors for this policy. Watch the spots where church conflicts commonly arise: setting the pastor's compensation, benevolence payments to people connected to leadership, and building or service contracts awarded to members. The procedure does not change — disclose, recuse, let the disinterested members decide whether the deal is fair, and record it in the minutes. =============================================================================== ------------------------------------------------------------------------------- This is a general template, not legal advice. Nonprofit conflict-of-interest requirements vary by state, and the right policy depends on your organization. Have this reviewed by an attorney in your state before you adopt it. This policy follows the structure of the sample the IRS publishes in Appendix A of the Form 1023 instructions.