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Is annual conflict of interest statement required for nonprofits?

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Is annual conflict of interest statement required for nonprofits?

I am currently on the Board of a 501(c)(3) organization that requires each director to sign a conflict of interest statement at the first meeting but does not update the form annually? Is an annual update a legal requirement?

I am not aware of any legal requirement to have a conflict of interest statement at all, let alone an annual update.  But it is clearly “best practices” to have a conflict statement and to require at least an annual update. I think it is fair to say that a Board that fails to do so is simply asking for trouble.  (See Ready Reference Page: “Conflict of Interest Policies Help Avoid Problems.”)

The Form 990 tax information return has asked whether a reporting nonprofit has a conflicts policy, and the new Form, which recognizes that a conflicts policy is not required by the Tax Code, specifically asks whether officers, directors and key employees are required to disclose annually?  Donors look at questions like that.

Without an appropriate questionnaire, it would be almost impossible to accurately give the required answers to questions about related party transactions or family and business relationships among directors that are also on the Form 990.  But most importantly, the Board should want to know about conflicts, so that they can deal with them before they become controversial and undermine the public’s trust in the organization.

Monday, July 13, 2009

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Comments

I would add that it depends on the state that your group is fundraising in. In Florida, for example, the state charitable registration laws require organizations to have a conflict of interest policy. The also requires require an annual certification of compliance with the policy by all directors, officers, and trustees of the charitable organization.

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