This article was originally published in the Standards for Excellence® Institute series, “52 Tips in 52 Weeks” in January 2020. The series provides nonprofit leaders with a brief nonprofit governance and management tip weekly over the course of 2020. Standards for Excellence is a Replication Partner of Sacred Sector.
By amy coates madsen
It is that time of year again! For many nonprofit boards, this is the time of year when all active board members are asked to complete an annual conflict of interest disclosure form. Such forms should be completed when an individual (such as board member, staff member or volunteer with decision making authority) becomes affiliated with a nonprofit organization and annually thereafter.
Conflicts of interest involving nonprofit board members, employees, or volunteers can undermine the public’s trust and confidence in any nonprofit. It is important that nonprofits have policies in place to address conflicts of interest to maintain public trust and ensure that the organization is compliant with requirements of the Internal Revenue Code and regulations. Conflicts of interest can not only harm the organization’s reputation but could even result in the loss of tax-exempt status.
Each nonprofit should have a board-approved conflict of interest policy and statement that is applicable to “board members, staff, and volunteers who have significant, independent decision-making authority regarding the resources of the organization.” A conflict of interest policy should “identify the types of conduct or transactions that raise conflict of interest concerns, should set forth procedures for disclosure of actual or potential conflicts, and should provide a review of individual transactions by the uninvolved members of the board of directors.” (Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector.) The conflict of interest statement should also provide space for individuals to disclose any known interests that they or a member of their immediate family may have. Each organization should carefully and consistently follow the tenets of its conflict of interest policy throughout the year.
About the Standards for Excellence Institute
The Standards for Excellence® originated as a special initiative of Maryland Nonprofits in 1998 and has since expanded into a national program to help nonprofit organizations achieve the highest benchmarks of ethics and accountability in nonprofit governance, management and operations. The program has been formally adopted by twelve state, regional, and national affiliate organizations. It is supported by over 170 Licensed Consultants and over 100 volunteers with professional experience in nonprofit governance and administration. Since its inception, the program has accredited or recognized over 200 individual nonprofit organizations that completed a rigorous application and review process to demonstrate adherence to the Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector. www.standardsforexcellence.org.
Amy Coates Madsen is the director of programs for Maryland Nonprofits and the director of the Standards for Excellence Institute, a national initiative to promote the highest standards of ethics and accountability in nonprofit governance, management, and operations, and to facilitate adherence to standards by all organizations. Amy received her Master of Arts in Policy Studies from the Johns Hopkins University Institute for Policy Studies in Baltimore, Maryland, and her bachelor’s degree from the Virginia Polytechnic Institute and State University in Blacksburg, Virginia. Amy is a member of Phi Beta Kappa and was appointed by the U.S. Department of the Treasury to serve on the Internal Revenue Service Advisory Committee on Tax Exempt and Government Entities (ACT), serving one term as the co-chair of the ACT’s Exempt Organizations subcommittee. The Standards for Excellence Institute is a program of the Maryland Association of Nonprofit Organizations where Amy has served for more than twenty-four years. Amy is responsible for coordinating all aspects of the association’s comprehensive ethics and accountability program and efforts to replicate the program nationally. She serves as a frequent trainer and writer in the areas of board conduct, program evaluation, program replication, fundraising ethics, and nonprofit management. She has taught courses on nonprofit ethics and accountability at the Johns Hopkins Institute for Policy Studies Certificate Program on Nonprofit Management.