Conflict-of-Interest Policy Template
A standard policy that protects your organization and its board members from financial conflicts.
Why you need this policy
The IRS Form 1023 (your application for tax-exempt status) literally asks: "Does the organization have a conflict of interest policy?" Form 990, filed annually, asks again: "Does the organization have a written conflict of interest policy?" The answer should be yes.
Beyond the paperwork, a COI policy protects your organization by:
- Defining what counts as a conflict (so people aren't guessing).
- Requiring board members to disclose conflicts upfront.
- Preventing board members with conflicts from voting on those decisions.
- Documenting the process in your board minutes (so you can prove you handled it properly).
- Protecting board members from legal liability if they've disclosed and recused themselves.
Donors and grant-makers expect this. State attorneys general look for it during investigations. And if your organization is ever sued or audited, a documented COI policy is evidence that your board acted in good faith.
The template
This template is modeled on the IRS Form 1023 sample policy (Appendix A). It's a standard, recognized format that grant-makers and auditors will accept.
CONFLICT OF INTEREST POLICY
[ORGANIZATION NAME]
Adopted by the Board of Directors on [DATE]
PURPOSE
The purpose of this policy is to protect [Organization Name]'s (the "Organization") integrity in its decision-making processes and to ensure that financial and other interests of individual board members, officers, and staff do not conflict with the interests of the Organization. This policy establishes procedures to identify, disclose, and address conflicts of interest.
DEFINITIONS
Interested Person: A board member, officer, employee, or committee member of the Organization.
Financial Interest: A direct or indirect financial interest, including:
- Ownership or investment interest in a business entity
- Compensation (paid or unpaid) from a business entity
- Receipt of gifts, loans, or other financial benefits from a business entity
- Investments in a business entity related to the Organization's operations
A financial interest is not necessarily a conflict. It becomes a conflict only if:
- The Interested Person is in a position to influence the Organization's decision
- The decision will provide a direct or indirect financial benefit to the Interested Person
- The financial benefit is substantially different from what the general public receives
POLICY
1. Duty to Disclose
Every Interested Person must disclose any financial interest that reasonably could be expected to influence the Organization's decisions. This includes:
- Personal financial interests
- Interests of family members (spouse, children, parents, siblings)
- Interests of organizations in which the Interested Person holds a position of authority
2. Timing of Disclosure
- Upon appointment or employment: All board members and staff must complete a disclosure form at the start of their tenure.
- Annually: All board members and staff must review and update their disclosure forms each year.
- At the time a conflict arises: Any new conflicts must be disclosed immediately.
3. Recusal from Vote
Any Interested Person who has a financial interest in a transaction or decision must:
- Not discuss the matter with board members (except to provide factual information requested)
- Not be present during the board's discussion of the transaction or decision
- Not vote on the transaction or decision
- Not attempt to influence the outcome
The Interested Person may briefly present their position before recusing themselves.
4. Documentation
- All disclosures and recusals must be documented in the board meeting minutes
- The minutes must include:
- The name of the Interested Person
- A description of the financial interest
- When the person recused themselves
- The vote count and outcome of the decision
5. Review and Approval by Disinterested Parties
Any transaction involving an Interested Person must be:
- Reviewed and approved only by board members without a financial interest in the transaction
- Approved as being fair, reasonable, and in the Organization's best interest
- Documented in the minutes with the Board's determination
ANNUAL ACKNOWLEDGMENT
Each board member, officer, and employee will sign an annual acknowledgment confirming that they:
- Have received and reviewed this policy
- Understand the Organization's commitment to ethical governance
- Agree to comply with the policy
- Have disclosed any known financial interests
Board members who refuse to sign the acknowledgment may be removed from the board.
VIOLATIONS
Any Interested Person who fails to disclose a financial interest, or who votes on a matter in which they have an undisclosed financial interest, is in violation of this policy.
The Board will address violations by:
- Investigating the facts
- Determining whether a violation occurred
- Correcting the violation if necessary (including voiding a decision if warranted)
- Taking appropriate corrective action (which may include removal from the Board)
OUTSIDE ADVISORS
The Organization may consult with outside legal counsel or other advisors to determine whether a specific transaction presents a conflict of interest that would require recusal.
ANNUAL REVIEW
This policy will be reviewed at least annually by the Board and updated as needed to ensure it continues to protect the Organization and its leadership.
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CONFLICT OF INTEREST DISCLOSURE FORM
I, _________________________ (printed name), hereby acknowledge that I am an Interested Person under the Conflict of Interest Policy of [Organization Name].
I confirm that I have received, reviewed, and understand this policy. I agree to comply with its requirements.
I declare the following financial interests (or state "None"):
Description of financial interest:
[Board member/employee to list any business interests, board memberships, investments, or family interests that could reasonably influence decisions made by the Organization]
_________________________________________________________________
_________________________________________________________________
I understand that:
- I must disclose any new financial interests as they arise
- Failure to disclose a material conflict of interest may result in my removal
- I must recuse myself from any vote or discussion in which I have a financial interest
- All disclosures and recusals will be documented in board meeting minutes
Signature: ________________________ Date: ___________
Printed Name: _________________________
Position/Title: _________________________
How to use this template
Practical implementation steps
- Adopt it formally: Present the policy to your board, discuss it, and vote to adopt it. Document the vote in your meeting minutes. Save the resolution that adopts it.
- Have every board member sign the annual disclosure form: Each year, ideally at your first board meeting, ask board members to complete the disclosure form. Even if they have no financial interests to report, they must sign. Keep the signed forms with your corporate records.
- Record recusals in every meeting's minutes: If someone recuses themselves, write it down. Example: "Jane Smith, who owns a contracting company bidding for the renovation project, disclosed this interest and recused herself from discussion and voting on this item."
- Define "family member" clearly: In practice, this means spouse, children, parents, and siblings. If you want to include in-laws or grandchildren, specify that in your bylaws.
- Make sure uninterested board members understand they control the vote: Once someone recuses themselves, the remaining board members own the decision. They must vote independently and approve only what they believe is fair and in the organization's interest.
The hardest part
Most board members don't like having to recuse themselves, and some will argue that their interest is "too small to matter." Don't negotiate. A policy with exceptions becomes useless. If someone has a financial interest in a decision, they recuse. That's the entire point.