Memo To: Harold Pumford
From: Bill Tackett
Date: December 1, 2005
RE: Conflict of Interest Query
What follows is a summary of conflict of interest statements found on the Internet. I had no luck on the CPA web site as of this writing.
From the National Academies, http://www.nationalacademies.org/coi/bi-coi_form-0.pdf, the following statements are on point:
For this purpose, the term "conflict of interest" means any financial or other interest which conflicts with the service of the individual because it (1) could significantly impair the individual's objectivity or (2) could create an unfair competitive advantage for any person or organization.
General Principles
The term "conflict of interest" means something more than individual bias. There must be an
interest, ordinarily financial, that could be directly affected by the work of the committee.
Conflict of interest requirements are objective and prophylactic. They are not an assessment of one's actual behavior or character, one's ability to act objectively despite the conflicting interest, or one's relative insensitivity to particular dollar amounts of specific assets because of one's personal wealth. Conflict of interest requirements are objective standards designed to eliminate certain specific, potentially compromising situations from arising, and thereby to protect the individual, the other members of the committee, the institution, and the public interest.
The term "conflict of interest" applies only to current interests. It does not apply to past interests that have expired, no longer exist, and cannot reasonably affect current behavior. Nor does it apply to possible interests that may arise in the future but do not currently exist, because such future interests are inherently speculative and uncertain. For example, a pending formal or informal application for a particular job is a current interest, but the mere possibility that one might apply for such a job in the future is not a current interest.
The term "conflict of interest" applies not only to the personal financial interests of the individual but also to the interests of others with whom the individual has substantial common financial interests if these interests are relevant to the functions to be performed. Thus, in assessing an individual's potential conflicts of interest, consideration must be given not only to the interests of the individual but also to the interests of the individual's spouse and minor children, the individual's employer, the individual's business partners, and others with whom the individual has substantial common financial interests. Consideration must also be given to the interests of those for whom one is acting in a fiduciary or similar capacity (e.g., being an officer or director of a corporation, whether profit or nonprofit, or serving as a trustee).
Financial Interests
The term "conflict of interest" as used herein ordinarily refers to financial conflicts of interest. In assessing potential conflicts of interest in connection with an individual's service on a committee of the institution used in the development of reports for sponsors, particular attention will be given to the following kinds of financial interests if they are relevant to the functions to be performed: employment relationships (including private and public sector employment and self-employment); consulting relationships (including commercial and professional consulting and service arrangements, scientific and technical advisory board memberships, and serving as an expert witness in litigation); stocks, bonds, and other financial instruments and investments including partnerships; real estate investments; patents, copyrights, and other intellectual property interests; commercial business ownership and investment interests; services provided in exchange for honorariums and travel expense reimbursements.
The Law Encyclopedia (http://www.thelawencyclopedia.com/term/conflict_of_interest) offers the following definition:
A situation in which a person has a duty to more than one person or organization, but cannot do justice to the actual or potentially adverse interests of both parties. This includes when a public official's personal interests are contrary to his/her loyalty to public business.
This section on conflict of interest is taken from "Boardroom Dancing", a handbook for nonprofit boards written by Jan Masaoka and Jude Kaye of CompassPoint Nonprofit Services, available February 2000.
http://www.boardcafe.org/bc2000_01.html
Sample Conflict of Interest Policy
The standard of behavior at the ____ Organization is that all staff, volunteers, and board members scrupulously avoid conflicts of interest between the interests of the ____ Organization on one hand, and personal, professional, and business interests on the other. This includes avoiding potential and actual conflicts of interest, as well as perceptions of conflicts of interest.
I understand that the purposes of this policy are to protect the integrity of the ____ Organization's decision-making process, to enable our constituencies to have confidence in our integrity, and to protect the integrity and reputations of volunteers, staff and board members. Upon or before election, hiring or appointment, I will make a full, written disclosure of interests, relationships, and holdings that could potentially result in a conflict of interest. This written disclosure will be kept on file and I will update it as appropriate. I understand that the purposes of this policy are to protect the integrity of the ____ Organization's decision-making process, to enable our constituencies to have confidence in our integrity, and to protect the integrity and reputations of volunteers, staff and board members. Upon or before election, hiring or appointment, I will make a full, written disclosure of interests, relationships, and holdings that could potentially result in a conflict of interest. This written disclosure will be kept on file and I will update it as appropriate.
In the course of meetings or activities, I will disclose any interests in a transaction or decision where I (including my business or other nonprofit affiliations), my family and/or my significant other, employer, or close associates will receive a benefit or gain. After disclosure, I understand that I will be asked to leave the room for the discussion and will not be permitted to vote on the question.
I understand that this policy is meant to supplement good judgment, and I will respect its spirit as well as its wording.
Signed: Date:
New Mexico Arts, (http://www.nmarts.org/) the state arts commission has the following sample language:
Conflict of Interest for Officers, Directors, Committee Members, Staff Members, and certain Consultants
No member of the Board of Directors, or any of its Committees, shall derive any personal profit or gain, directly or indirectly, by reason of his or her participation with the XYZ Nonprofit. Each individual shall disclose to the organization any personal interest that he or she may have in any matter pending before the organization and shall refrain from participation in any decision on such matter. Any member of the Board, any Committee, or Staff who is an officer, board member, a committee member, or staff member of a client organization or vendor of the XYZ Nonprofit shall identify his or her affiliation with such agency or agencies; further, in connection with any committee or board action specifically directed to that agency, s/he shall not participate in the decision affecting that agency and the decision must be made and/or ratified by the full board.
Any member of the Board, any Committee, Staff, and certain Consultants shall refrain from obtaining any list of clients for personal or private solicitation purposes at any time during the term of their affiliation.
At this time, I am a board member, committee member, or an employee of the following
organizations:
______
______
______
Now this is to certify that I, except as described below, am not now nor at any time during the
past year have been:
1) A participant, directly or indirectly, in any arrangement, agreement, investment, or other activity
with any vendor, supplier, or other party doing business with the XYZ Nonprofit which has resulted
or could result in personal benefit to me.
2) A recipient, directly or indirectly, of any salary payments or loans or gifts of any kind or any free
service or discounts or other fees from or on behalf of any person or organization engaged in any
transaction with the XYZ Nonprofit.
Any exceptions to 1 or 2 above are stated below with a full description of the transactions and
of the interest, whether direct or indirect, which I have (or have had during the past year) in the
persons or organizations having transactions with the XYZ Nonprofit.
______
______
______
Date:______Signature:______
Printed:______
Please let me know what I can do further on this topic while you are in CA.
Bill
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