February 4, 2026
Nonprofit leaders are expected to manage so much, but one responsibility that should never be overlooked is managing conflicts of interest. A strong Conflict of Interest Policy protects your organization, your board, and the public trust.
Why Conflict of Interest Policies Matter
In a nonprofit organization, a conflict of interest arises when someone involved with the organization has a personal interest that could interfere — or appear to interfere — with the organization’s best interests.
While these situations may seem routine, failing to address them appropriately can:
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Undermine public confidence
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Damage your organization’s reputation
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Expose your nonprofit to legal and governance risk
A clear policy helps prevent problems before they arise.
What Is a Conflict of Interest?
A conflict of interest generally occurs when an individual:
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Stands to benefit personally from a decision made by the nonprofit, or
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Has a relationship with a person or business that could influence the organization’s actions
For example, a board member with a financial interest in a vendor being considered by the nonprofit must disclose that relationship and step back from the decision-making process.
What a Strong Policy Should Do
A well-drafted Conflict of Interest Policy brings clarity and consistency to how your nonprofit operates. At a minimum, it should:
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Clearly define what constitutes a conflict of interest
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Explain how and when conflicts must be disclosed
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Outline how disclosed conflicts are reviewed
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Describe how conflicts are managed or resolved
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Require documentation of decisions and actions taken
This structure supports ethical decision-making and demonstrates accountability.
IRS Guidance and Best Practices
Although the IRS does not require nonprofits to have a Conflict of Interest Policy to maintain tax-exempt status, it does ask on IRS Form 990 whether your organization has adopted one.
That question alone signals that the IRS views conflict policies as a governance best practice — and donors, regulators, and the public often do as well.
Key Elements to Include
To be effective, your policy should address:
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When disclosures must be made (such as before votes or contracts)
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Who reviews potential conflicts
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Whether recusal from discussion or voting is required
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How decisions are documented and retained
Consistency and transparency are essential — even when no actual conflict exists.
Conflict of Interest Policies only work when they are used.
Adopting a policy is the first step. Boards should revisit disclosures regularly, document decisions carefully, and treat conflicts as a normal governance issue. Its not meant to be treated like a personal failing.
Final Takeaway
A Conflict of Interest Policy is a practical tool for protecting your mission, your leadership, and your credibility.
By adopting and enforcing a thoughtful policy, your nonprofit signals its commitment to integrity, accountability, and responsible governance.
Need Help Drafting or Updating Your Policies?
The Gordon Fischer Law Firm works with nonprofits to draft, revise, and tailor the ten governance policies referenced on IRS Form 990 — including Conflict of Interest Policies — to fit your organization’s mission and operations.
📧 Email: gordon@gordonfischerlawfirm.com
