Dear Nonprofiteer, What form can assure our proper function?

Dear Nonprofiteer,

are a non-profit social services agency in Oregon.  We are
seeking a template for a Board of Directors “Conflict of Interest
Disclosure” form.  Can you help?

Signed, Ask Questions First and Shoot Later

Dear Ask First,

The Nonprofiteer suspects you need a disclosure form less than you need a disclosure policy–and that the content of that policy depends entirely on what you’re worried about.  "Conflict of interest" can mean a number of different things, from a prior commitment to a competing charity to a financial interest in having your agency choose one course of action over another.  And which of these things is relevant will vary not only from group to group but from time to time.  The only policy that covers all possible circumstances has not one but two components: disclosure, and recusal.

Disclosure, in turn, has two facets: initial and ongoing.  During the recruitment process, you should ask every prospective Board member about the kind of conflict that would most interfere with his/her full participation in the work of the Board: affiliation with competing charities.  It’s easy enough at this point to work out any necessary compromises ("Well, then, we won’t confuse the Whoosis Foundation by sending you over there–you just keep talking to them about Beta Agency, and we’ll find somebody else to make the case for us"), as well as to back away from the affiliation if the number of competing commitments seems excessive.  Also, it’s a question you can ask without using the dread term "conflict of interest," the very sound of which will often affront a stranger ("Of course I don’t have any conflicts of interest–what, do you think I’m unethical?"), while at the same time it gives you the chance to say, "To avoid putting our Board members on the spot we ask them about competing connections on a regular basis–every time we start a new project, in fact."

And then you do just that: every time the Board begins to consider a new project or contract, ask every Board member to sign a simple statement: "I have no financial interest in the outcome of this transaction, nor do I have any interest in the outcome on behalf of any other group or agency with which I am affiliated."  This statement is broad enough that it will prompt any honest Board member–and none of us has any other kind, do we?–to disclose any connections to the transaction before another step is taken.

Any Board member unable to sign this form should be required to recuse him/herself from Board decisionmaking on the transaction: it’s that simple.  This doesn’t, of course, mean that the transaction can’t be undertaken, just that it has to be undertaken by the decision of people without an interest in the outcome.

Using the rules of disclosure and recusal enables nonprofits to hire Board members when it’s necessary and appropriate to do so.  That’s not the case very often–hiring Board members puts staff in the awkward position of trying to supervise their supervisors, while putting the rest of the Board in the equally awkward position of being a colleague’s client–but there are certainly occasions when the highest-value (that is, both cheapest and best) person for the job will be the accountant who’s also your treasurer, or the architect who chairs your facilities committee.  Provided that no one gets to vote on his/her own hiring–and provided that your agency uses competitive bidding for any substantial-sized contract–there’s no conflict of interest.  (Competitive bidding assures that the insider is, in fact, the cheapest and best–or reveals that s/he’s not.) 

Doubtless you’ve heard otherwise–"Oh, we can’t pay you to do that because you’re on the Board."  Usually when Executive Directors and Board Presidents say this, though, they’re using "conflict of interest" as an excuse; what they really mean is either "We don’t want it done at all" or "You’re not the person we want doing it." 

BoardSource (formerly the National Center for Nonprofit Boards) has a clear description of conflict of interest issues (along with various forms you can buy), while the Nonprofit Risk Management Center has both explanation and disclosure form on-line for free.  Again, the explanations are more useful than the forms, because conflict of interest is such a fluid phenomenon–by the time you know enough to write a specific set of statements on which you want your Board’s concurrence, you’re already in mid-transaction. 

Whatever form you adopt, though, don’t fail to ask senior staff to sign it, too.  The Nonprofiteer well remembers the no-bid computer services contract adopted by a Board whose secretary stood to make a substantial commission on the sale, and shoved through by an Executive Director to whom the said secretary had offered a job.  If people are in a position of authority, they’re in a position to have a conflict.


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One Response to “Dear Nonprofiteer, What form can assure our proper function?”

  1. Conflicts, whistles and records–oh, my! « Says:

    […] latest issue of her newsletter contains a sample whistleblower policy. An earlier post of the Nonprofiteer’s directs you to a sample conflict of interest policy. Recommendations […]

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