Conflict-of-interest policy, ready to sign

Conflict of Interest Policy
of [ORGANIZATION NAME]

Article I, Purpose

The purpose of the conflict of interest policy is to protect 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.

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.

d. Compensation includes direct and indirect remuneration as well as gifts or favors that aren’t insubstantial. A financial interest isn’t 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 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.

2. Determining Whether a Conflict of Interest Exists After disclosure of the financial interest and all material facts, and after any discussion with them, the interested persons 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.

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, they 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 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. If a more advantageous transaction or arrangement isn’t 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 Organizations 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.

4. Violations of the Conflict 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 interest, 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 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

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 compensation.

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 member's compensation.

c. 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.

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 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 that 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 doesn't 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 don't 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.

Article IX, Section 25F Scholarships and Disqualified Persons

This Article is added to Articles I through VIII. It applies while the Organization operates as a scholarship granting organization under section 25F of the Internal Revenue Code, and for scholarship decisions it controls over Articles I through VIII. Its terms have the meanings given in section 25F and the regulations under it, including Proposed Treasury Regulation section 1.25F-3(d) while the Organization relies on it.

1. No Scholarships to Disqualified Persons The Organization shall not award a scholarship to a disqualified person. Disqualified persons are: (a) substantial contributors, meaning any person who gives more than $5,000 to the Organization in a taxable year if that is more than 2 percent of the contributions the Organization received that year, or more than $5,000 to one of its section 25F segregated accounts in a taxable year if that is more than 2 percent of the contributions that account received that year, with a spouse's gifts counted together; (b) directors, officers, and trustees, and individuals having similar powers and responsibilities; (c) any individual who participates in selecting scholarship recipients or determining scholarship awards, including as a member of a committee; and (d) the family members of anyone described in (a), (b), or (c).

2. Family A person's family means the person's spouse; the ancestors and descendants of the person or the person's spouse (a legally adopted child or step-child counts as a descendant); the siblings of the person or the person's spouse; the descendants of those siblings; and the spouse of any of them.

3. Recusal Does Not Cure The procedures in Article III (disclosing, leaving the meeting, and not voting) do not make a disqualified person eligible for a scholarship. As a policy of the Organization, an individual who participates in selecting recipients or determining awards is treated as a disqualified person, and the members of his or her family as ineligible, even if the individual takes no part in the decision about a particular applicant. Blind or anonymized selection procedures and unpaid service do not change any person's status.

4. Who Participates For this Article, the Organization treats as participating in selection any individual, including a director, officer, employee, volunteer, or contractor, who scores, ranks, recommends, or decides scholarship applications or award amounts.

5. Duration Directors, officers, trustees, individuals with similar powers, and individuals described in item 4 remain disqualified persons through the end of the Organization's taxable year in which they stop serving and through the end of the following taxable year. A substantial contributor is a disqualified person for the taxable year in which the threshold is crossed (determined as of the close of that year) and for the following taxable year. A family member is a disqualified person while the related person is one.

6. Disclosure Before accepting a role described in item 1(b) or item 4, a person whose family member intends to apply for a scholarship shall tell the Board, because service in that role makes the family member ineligible. Each person in such a role shall disclose in writing, before beginning service and in each annual statement under Article VI, whether any member of his or her family has applied for or receives a scholarship from the Organization, and shall affirm that he or she has read and will comply with this Article.

7. Screening Before each award, the Organization shall check the applicant against the disclosures under item 6, its list of current and former directors, officers, trustees, and selection participants still within the period in item 5, and its records of contributions by donor, with spouses combined, tested both for the Organization as a whole and for each section 25F segregated account, and shall record the result. A scholarship awarded to a substantial contributor or a substantial contributor's family member is not treated as awarded to a disqualified person if, on the award date, the contributions received through that date would not have made the donor a substantial contributor and the Organization did not know or reasonably expect that the donor would become one by the close of the taxable year.

8. Business Relationships A director, officer, or committee member who has a business, employment, or other financial relationship with an applicant, the applicant's family, or a school or vendor that would receive the applicant's scholarship funds shall be treated as an interested person under Article II for that decision and shall follow Article III.