|
CONFLICTS OF INTEREST
Discussion
"A conflict of interest arises when a person in a position of
authority over an organization, such as a director, officer, or manager, may
benefit personally from a decision he or she could make." [IRS]
The reality is that potential conflicts of interest are virtually unavoidable in the nonprofit arena.
Most individuals are willing to serve on boards because they have a personal or
professional interest in the purpose or activities of the organization. At the same time, it is essential that boards successfully manage potential conflicts in order to preserve the public trust and withstand IRS
and VA scrutiny.
Because conflicts of interest are an inherent element of most nonprofits, a great deal of guidance is available to help boards identify potential conflicts and to orchestrate resolutions that pass public,
VA and IRS scrutiny.
NPC
boards face particularly troubling conflict of interest situations.
Individual board members may find that their responsibilities as an NPC board
member and their responsibilities as employees of the VA create potential
conflicts of interest.
The nonprofit duties of care and loyalty require board members to exercise
reasonable care in their performance as board members. Yet they must also
remain loyal to VA. Fortunately, VA and NPC interests are generally congruent
rather than conflicting.
Section 7366(c)(1) of the Title 38 statute
that authorizes the NPCs invokes federal ethics regulations pertaining to
conflicts of interest:
Each member of the board of directors of a
corporation established under this subchapter, each employee of such a
corporation, and each employee of the Department who is involved in the
functions of the corporation during any year shall be subject to federal
laws and regulations applicable to Federal employees with respect to
conflicts of interest in the performance of official functions.
Practical
application of the ethics regulations to NPCs requires a conflict of interest
policy that involves recusal. If there is a perceived or potential conflict, the affected board member
should recuse himself/herself from any board action involving the conflict. See
Standards of Ethical Conduct for Employees of the Executive Branch, subpart E
- Impartiality in Performing Official Duties, §2635.501 and §2635.502.
If
an NPC board consists of the statutory minimum of five, it may be difficult to
maintain a quorum while recusing one or more affected board members. As a
result, NAVREF recommends that NPC boards have seven to nine members. See
related discussion in Board
Responsibilities
Helpful Link
BoardSource - http://www.boardsource.org
Back to Governance >
|
