The IRS does not *require* that 501(c)(3) organizations have a conflict of interest policy, but commencing with the forms filed for Tax Year 2008, the IRS will be asking charities about their management and governance practices. The draft form dated December 2007 includes the following questions:
Also, if the organization answers yes to investing in or contributing assets to a joint venture, the form asks if there is a written policy to evaluate such participation.
See Part VI (B) of the new Form 990 Core Form.
ACE has published a 501(c)(3) Due Diligence Form 990 Checklist that can be used by schools to ensure that the necessary policies and procedures to prevent compliance issues are in place. There is a list of recommended policies on this checklist, along with suggested procedures and committees.
See also the NASCO article titled: IRS Exempt Org Director Tells NASCO Members that IRS will maintain good governance questions on new 990.
As is noted in the first resource listed below, the law governing fiduciaries (case law) requires individuals who manage and govern organizations to exercise due care in administering the affairs of the organization. Also required is a duty of loyalty, which prohibits fiduciaries from using their position to obtain personal gain or gain for others at the organization's expense. A written conflict of interest policy helps fiduciaries adhere to these duties.
So while there is not currently a federal legal requirement* for a financial conflict of interest policy for the Board of Trustees, case law would seem indicate a written COI policy is the best way to enforce the law on fiduciary duty.
*Conflict of Interest Policies are required in other contexts, such as for institutions receiving research money from the National Science Foundation. See the NSF Fedlaw page.
Resources
Conflict of Interest IRS Sample Policy Annotated for Grantmakers by Legal Services and Ethical Standards Group
IRS Sample Conflict of Interest Policy
Governance and Related Topics-501(c)(3) Organizations
Recommeded policies and practices from the IRS, posted Feb. 4, 2008. Covers mission, organizational documents, governing body, governance and management policies, financial statements and 990 Reporting, and transparency and accountability.
NACUBO Comments on 990 Redesign
Alexander E. Dreier and Martin Michaelson, "A Guide to Updating the Board’s Conflict of Interest Policy" (Association of Governing Boards of Colleges and Universities 2006).
ACE Paper on Conflict of Interest: January 2008. 10 page paper and an executive summary. The paper is to help IHEs strengthen policies and practices with regard to ethical institutional practices, including identification and management of conflict of interest.
For more governance resources, see the Sarbanes Oxley Fedlaw Page and the resources at the bottom of that page.
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updated 2/10/09 to add ACE checklist
links updated 3/3/09 rab
3/3/09 mlo checked links and added compliance partner
compliance box links updated 6/2/09 rab
updated 6/8/09 by mlo to add related policies
Last Revised 08-Jun-09 02:05 PM.
