How should a nonprofit organization handle conflicts of interest?

Conflicts of interest can arise when employees, volunteers, or other persons involved with a nonprofit organization have interests that are inconsistent with the best interests of the organization. Such conflicts of interest can cause problems for the organization that not only harm its reputation but can also be a legal liability. To prevent issues, nonprofit organizations in California should have a formal policy on conflicts of interest that clearly outlines how such conflicts should be handled. The policy should be written and distributed to all board members, staff, and volunteers, as well as kept on file with the organization. It should clarify that employees and volunteers must disclose any conflicts of interest they may have and should not take any action on behalf of the organization if there is a potential conflict. The organization should also create a procedure that allows the board of directors to evaluate any potential conflicts and assess any potential damage to the reputation or legal standing of the organization. In addition, the organization should document the results of the evaluation process, including any measures the organization has taken in response to the conflict. This policy should be revisited at least annually to ensure it is up-to-date and compliant with any changes in the law. By taking such proactive steps, a nonprofit organization in California can protect itself from legal and reputational risks resulting from conflicts of interest.

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How should a nonprofit organization handle conflicts of interest?

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