Fillable Printable Sample Conflict of Interest Policy

Sample Conflict of Interest Policy

Appendix A: Sample Conflict of Interest Policy – IRS Instructions for Form 1023

Article I

Purpose

The purpose of the conflict of interest policy is to protec t this tax-exempt organization’s

(Organization) interest when it is contemplating entering into a transaction or

arrangement that might benefit the private interest of an officer or director 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.

Article II

Definitions

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.

If a person is an interested person with respect to any entity in the health care system of

which the organization is a part, he or she is an interested pers on with respect to all

entities in the health care system.]

2. Financial Interest

A person has a financial interest if the person has, directly or indirectly, through business,

investment, or family:

a. An ownership or investment interest in any entity with which the Organization has a

transaction or arrangement,

b. A compensation arrangement with the Organization or with any entity or individual

with which the Organization has a transaction or arrangement, or

c. 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 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.

Article III

Procedures

1. Duty to Disclose

In connection with any actual or possible conflict of interest, an interested person m ust

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.

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, he/she shall leave the governing b o ard 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.

3. Procedures for Addressing the Conflict of Interest

a. An interested person may make a presentation at the governing board or committee

meeting, but after the presentation, he/she shall leave the meeting during the discussion

of, and the vote on, the transaction or arrangement involving the possible conflict of

interest.

b. The chairperson 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. After exercising due diligence, the governing board or committee shall determ ine

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. 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.

Instructions for Form 1023 -25-

4. Violations of the Conflicts of Interest Policy

a. 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. 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 inte rest, it shall take

appropriate disciplinary and corrective action.

Article IV

Records of Proceedings

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 conf lict 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

a. 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 com pensation.

b. 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 mem ber’s compensation.

c. No voting member of the governing board or any committee whose jurisdiction

includes compensation m atters and who receives compensation, directly or indirectly,

from the Organization, either individually or collectively, is prohibited from providing

information to any committee regarding compensation.

Article VI

Annual Statements

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 the conflicts 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.

Article VII

Periodic Reviews

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. 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 in an excess

benefit transaction.

Article VIII

Use of Outside Experts

When conducting the periodic reviews as provided for in Article VII, the Organization

may, but need not, use outside advisors. If outside experts are used, their use shall not

relieve the governing board of its responsibility for ensuring periodic reviews are

conducted.