How Your Nonprofit Can Avoid Conflicts of Interest

When talking about conflicts of interest on a nonprofit board, it’s not just about discussing differing opinions. It’s about finances. In fact, the Internal Service Revenue (IRS) has become increasingly alert with incidents regarding conflict of interest.

Unfortunately, it’s not always so easy to avoid this issue. For the most part, however, it’s possible as long as you plan accordingly with the right policies and procedures. Get ahead by preparing your nonprofit for any issue it might have to handle in the future before the issue arises.

If you’re wondering how your nonprofit can avoid conflicts of interest entirely, here are some tips below.

Conflict of Interest Policies

The National Council of Nonprofits recommends creating a policy that addresses those who may have conflicts of interest before becoming a part of a nonprofit board. When a conflict has been addressed, it must be properly disclosed.

Then those that have disclosed probable conflict should be effectively disbarred from voting on any matter that regards that conflict of interest. It is imperative that your nonprofit takes these issues seriously, as failing to address a conflict of interest could prove problematic for your reputation and your finances.

How to Handle a Conflict of Interest

The Guide to Nonprofit Finances has a list of six practices that an organization can take in order to determine when a conflict has happened and ways to address it. These actions are as follows:

  1. Establish what constitutes “inappropriate behavior” before it happens.
  2. Ask similar organizations what their conflict of interest policies are, and how they’ve handled these situations in the past.
  3. Speak to professional associations (such as certifying agencies or peer networks) if they have any guidelines or frameworks in place to address these issues.
  4. Disclose all potential issues and conflicts, as early as possible.
  5. Be on the lookout for conflicts of interest, and call them out (privately first, only taking the issue to the board if speaking with the individual privately does not resolve the issue).
  6. Remain impartial towards your own potential conflicts of interest, and excuse yourself from the discussion and voting surrounding the topic where you have a conflict.

When you’re the owner of a nonprofit, it’s crucial to set an example. Don’t let a conflict of interest bring down your nonprofit. Address issues now and handle them accordingly, and establish clear criteria for what to do when a conflict does arise. It is this proactivity that will allow you to smoothly navigate a conflict of interest without it escalating into a greater risk exposure for your nonprofit. In addition to establishing these policies and procedures, protect your organization from liabilities such as this one with a commercial insurance program that is geared specifically towards addressing nonprofit organizations’ exposures and liabilities.

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