CONFLICT OF INTEREST POLICY

[ORGANIZATION NAME]

Adopted: [DATE]

ARTICLE I - PURPOSE

The purpose of this Conflict of Interest Policy is to protect [ORGANIZATION NAME]'s (the "Organization") interest when it is contemplating entering into a transaction or arrangement that might benefit the private interest of an officer, director, or key employee of the Organization or might result in a possible excess benefit transaction.

This policy is intended to supplement but not replace any applicable state and federal laws governing conflict of interest applicable to nonprofit and charitable organizations.

[// GUIDANCE (IRS): This policy is based on the sample Conflict of Interest Policy in Appendix A of the IRS Form 1023 Instructions. While not legally required, the IRS strongly encourages adoption of such a policy and asks about it on Form 1023 and Form 990.]

ARTICLE II - DEFINITIONS

Section 2.1 Interested Person

Any director, principal officer, or member of a committee with governing board delegated powers, who has a direct or indirect financial interest, as defined below, is an "Interested Person."

Section 2.2 Financial Interest

A person has a "Financial Interest" if the person has, directly or indirectly, through business, investment, or family:

(a) Ownership or Investment Interest: An ownership or investment interest in any entity with which the Organization has a transaction or arrangement;

(b) Compensation Arrangement: A compensation arrangement with the Organization or with any entity or individual with which the Organization has a transaction or arrangement; or

(c) Potential Interest: 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.

A Financial Interest is not necessarily a conflict of interest. Under Article III, Section 3.2, a person who has a Financial Interest may have a conflict of interest only if the appropriate governing board or committee decides that a conflict of interest exists.

Section 2.3 Key Employee

For purposes of this policy, "Key Employee" means any employee who:

(a) Has responsibilities, powers, or influence over the Organization similar to those of officers and directors;

(b) Manages a discrete segment or activity of the Organization that represents a substantial portion of the activities, assets, income, or expenses of the Organization;

(c) Has or shares authority to control or determine a substantial portion of the Organization's capital expenditures, operating budget, or compensation for employees; or

(d) Receives compensation from the Organization and all related organizations in excess of $150,000.

Section 2.4 Family Members

Family members include a person's spouse, domestic partner, ancestors, children, grandchildren, great-grandchildren, siblings (whether by whole or half blood), and the spouses or domestic partners of children, grandchildren, great-grandchildren, and siblings.

ARTICLE III - PROCEDURES

Section 3.1 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 directors and members of committees with governing board delegated powers considering the proposed transaction or arrangement.

Section 3.2 Determining Whether a Conflict of Interest 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 governing board or committee meeting while the determination of a conflict of interest is discussed and voted upon.

The remaining board or committee members shall decide if a conflict of interest exists.

Section 3.3 Procedures for Addressing the Conflict of Interest

(a) Presentation by Interested Person: An Interested Person may make a presentation at the governing board or committee meeting, but after the presentation, the Interested Person shall leave the meeting during the discussion of, and the vote on, the transaction or arrangement involving the possible conflict of interest.

(b) Investigation and Alternatives: The chair of the governing board or committee shall, if appropriate, appoint a disinterested person or committee to investigate alternatives to the proposed transaction or arrangement.

(c) Determination of Fairness: After exercising due diligence, the governing board or committee shall determine whether the Organization can obtain with reasonable efforts a more advantageous transaction or arrangement from a person or entity that would not give rise to a conflict of interest.

(d) Approval Requirements: If a more advantageous transaction or arrangement is not reasonably possible under circumstances not producing a conflict of interest, the governing board or committee shall determine by a majority vote of the disinterested directors whether the transaction or arrangement is in the Organization's best interest, for its own benefit, and whether it is fair and reasonable. In conformity with the above determination, it shall make its decision as to whether to enter into the transaction or arrangement.

Section 3.4 Violations of the Conflict of Interest Policy

(a) Investigation: If the governing board or committee has reasonable cause to believe a member has failed to disclose actual or possible conflicts of interest, it shall inform the member of the basis for such belief and afford the member an opportunity to explain the alleged failure to disclose.

(b) Corrective Action: If, after hearing the member's response and after making further investigation as warranted by the circumstances, the governing board or committee determines the member has failed to disclose an actual or possible conflict of interest, it shall take appropriate disciplinary and corrective action.

(c) Sanctions: Appropriate disciplinary and corrective action may include:
- Removal from involvement in the transaction or arrangement;
- Written warning;
- Removal from committee assignments;
- Removal from the board;
- Termination of employment (for staff);
- Referral to appropriate authorities if criminal conduct is suspected.

ARTICLE IV - RECORDS OF PROCEEDINGS

Section 4.1 Minutes Documentation

The minutes of the governing board and all committees with board delegated powers shall contain:

(a) The names of the persons who disclosed or otherwise were found to have a Financial Interest in connection with an actual or possible conflict of interest, the nature of the Financial Interest, any action taken to determine whether a conflict of interest was present, and the governing board's or committee's decision as to whether a conflict of interest in fact existed.

(b) The names of the persons who were present for discussions and votes relating to the transaction or arrangement, the content of the discussion, including any alternatives to the proposed transaction or arrangement, and a record of any votes taken in connection with the proceedings.

ARTICLE V - COMPENSATION

Section 5.1 Voting on Compensation

A voting member of the governing board who receives compensation, directly or indirectly, from the Organization for services is precluded from voting on matters pertaining to that member's compensation.

Section 5.2 Committee Members and Compensation

A voting member of any committee whose jurisdiction includes compensation matters and who receives compensation, directly or indirectly, from the Organization for services is precluded from voting on matters pertaining to that member's compensation.

Section 5.3 Providing Information

No voting member of the governing board or any committee whose jurisdiction includes compensation matters and who receives compensation, directly or indirectly, from the Organization, either individually or collectively, is prohibited from providing information to any committee regarding compensation.

[// GUIDANCE (IRS): These compensation provisions help avoid "excess benefit transactions" under IRC Section 4958. Compensation decisions should be made by disinterested parties using comparable data.]

ARTICLE VI - ANNUAL STATEMENTS

Section 6.1 Annual Disclosure

Each director, principal officer, and member of a committee with governing board delegated powers shall annually sign a statement which affirms such person:

(a) Has received a copy of this Conflict of Interest Policy;

(b) Has read and understands the policy;

(c) Has agreed to comply with the policy; and

(d) Understands the Organization is charitable and in order to maintain its federal tax exemption it must engage primarily in activities which accomplish one or more of its tax-exempt purposes.

Section 6.2 Disclosure of Interests

In addition to the affirmations in Section 6.1, each director, principal officer, and key employee shall annually disclose:

(a) All entities of which such person is an officer, director, trustee, member, owner (either as a sole proprietor or partner), or employee and with which the Organization has, or might reasonably be expected to have, a relationship or transaction;

(b) Any transaction in which the Organization was or is to be a participant and in which such person might have a conflicting interest;

(c) All family relationships with any other director, officer, or key employee of the Organization.

ARTICLE VII - PERIODIC REVIEWS

Section 7.1 Compliance Review

To ensure the Organization operates in a manner consistent with charitable purposes and does not engage in activities that could jeopardize its tax-exempt status, periodic reviews shall be conducted.

Section 7.2 Scope of Review

The periodic reviews shall, at a minimum, include the following subjects:

(a) Whether compensation arrangements and benefits are reasonable, based on competent survey information, and the result of arm's length bargaining;

(b) Whether partnerships, joint ventures, and arrangements with management 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, impermissible private benefit, or an excess benefit transaction.

ARTICLE VIII - USE OF OUTSIDE EXPERTS

Section 8.1 Authorization to Use Experts

When conducting the periodic reviews as provided for in Article VII, the Organization may, but need not, use outside advisors.

Section 8.2 Purpose

If outside experts are used, their use shall not relieve the governing board of its responsibility for ensuring periodic reviews are conducted.

ANNUAL CONFLICT OF INTEREST DISCLOSURE STATEMENT

I, the undersigned, being a director, officer, key employee, or committee member of [ORGANIZATION NAME], hereby:

AFFIRMATIONS

☐ I have received a copy of the Conflict of Interest Policy of [ORGANIZATION NAME].

☐ I have read and understand the policy.

☐ I agree to comply with the policy.

☐ I understand that [ORGANIZATION NAME] is a charitable organization and that in order to maintain its federal tax exemption it must engage primarily in activities that accomplish one or more of its tax-exempt purposes.

DISCLOSURE OF ACTUAL OR POTENTIAL CONFLICTS

1. Affiliations with Other Organizations

Please list all entities (corporations, partnerships, LLCs, trusts, nonprofit organizations) of which you are an officer, director, trustee, member, owner (either as a sole proprietor or partner), or employee and with which [ORGANIZATION NAME] has, or might reasonably be expected to have, a relationship or transaction:

☐ None to disclose

2. Financial Interests in Transactions

Please describe any transaction or arrangement involving [ORGANIZATION NAME] in which you have a direct or indirect financial interest:

_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________

☐ None to disclose

3. Family Relationships

Please list any family members (as defined in the policy) who are directors, officers, or key employees of [ORGANIZATION NAME]:

☐ None to disclose

4. Other Potential Conflicts

Please describe any other interests, relationships, or circumstances that could create a conflict of interest or the appearance of a conflict of interest:

_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________

☐ None to disclose

SIGNATURE

I certify that the information provided above is true, complete, and accurate to the best of my knowledge. I agree to promptly notify [ORGANIZATION NAME] if any of the above information changes during the year.

_________________________________________
Signature

_________________________________________
Printed Name

_________________________________________
Title/Position

_________________________________________
Date

POLICY ADOPTION

This Conflict of Interest Policy was adopted by the Board of Directors of [ORGANIZATION NAME] on [DATE].

_________________________________________
[NAME], Chair

_________________________________________
[NAME], Secretary

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