The Essential Conflict of Interest Policy Template for Your Nonprofit
Do You Need a Conflict of Interest Policy?
Nonprofit organizations are just that—mission-driven, not profit-driven. But good intentions alone aren’t enough to keep your organization out of trouble. Without clear guardrails, even the most well-meaning board or staff member can stumble into situations where personal interests get tangled up with the nonprofit’s best interests. That’s where a Conflict of Interest Policy comes in.
A well-drafted policy is more than a piece of paperwork. It’s a safeguard for your mission, your reputation, and your tax-exempt status. The IRS specifically looks for nonprofits to have procedures that prevent private benefits from flowing to insiders like officers, directors, or trustees. And your donors, volunteers, and community supporters expect to see that your organization operates with integrity and transparency.
Think of a Conflict of Interest Policy as both a shield and a compass. It shields your organization from legal or financial risk, and it points your people—board members, staff, and volunteers—toward decisions that honor your mission first and foremost.
Purpose and Scope
The purpose of a Conflict of Interest Policy is simple: to set up a clear process for disclosing and handling actual or potential conflicts of interest. Conflicts of interest happen and when handled properly, aren’t an issue. The important thing is to have a written policy in place for mitigating these conflicts…before they arise. This ensures your nonprofit operates in line with its charitable purpose, not the personal interests of individuals involved.
The scope is broad on purpose. It applies not only to your board of directors, but also to officers, employees, volunteers, contractors, and anyone acting on behalf of your organization. Why? Because conflicts can arise at any level—from a board chair voting on a contract that benefits their company, to a volunteer steering business to a family friend.
By spelling out expectations up front, you protect the organization’s tax-exempt status, guard its reputation, and give everyone a fair process to follow when gray areas appear.
When gray areas appear is a key point, because they inevitably will appear. Sometimes they are legitimate conflicts of interest, other times the situation merely has the appearance of impropriety. In either case, referring to a clear conflict of interest policy allows your organization to be protected.
What Belongs in a Conflict of Interest Policy?
A good template should include:
- Definitions – Clear explanations of what a “conflict of interest” means in your context.
- Disclosure Procedures – How and when board members, staff, and volunteers must disclose a potential conflict.
- Review & Management – Steps the board or committee will take to review disclosures, including when individuals must recuse themselves from voting.
- Consequences – What happens if someone fails to disclose a conflict, from corrective action to removal if necessary.
- Annual Statements – A requirement that directors and key employees sign an acknowledgment each year, disclosing any potential conflicts.
The policy should also outline how the board maintains confidentiality and ensures fairness during the review process.
Why This Matters
Conflicts of interest don’t always come from bad intentions. Many times, they’re simply the result of tight-knit communities where people wear multiple hats. A board member may own a local business the nonprofit wants to hire. A staff member may be related to a vendor. These aren’t unusual scenarios, I’ve ran into similar situations at least a dozen times over the years. That said, without a policy in place, such situations can erode trust and potentially jeopardize your nonprofit’s standing with the IRS.
By adopting and following a Conflict of Interest Policy, your organization sends a clear message: we put our mission first. That commitment builds confidence with donors, regulators, and the communities you serve.
Get Your Free Template
To make this easy, we’ve created a Conflict of Interest Policy Template and Checklist that you can download and customize for your organization. It includes sample language, disclosure procedures, and annual acknowledgment forms, everything you need to get your board and staff on the same page. For more resources, check out our resources page!