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What Is Your Conflict-Of-Interest Score?

A Self-Assessment

Having worked with thousands of nonprofits over the years, we have seen just about every possible scenario you could think of.  At least it seems that way!  One of the most common issues we encounter, especially with startups, is conflict-of-interest.  It is usually of the innocent variety, meaning that the people involved didn’t necessarily set out to do anything wrong, it just ended up that way.

When you are dealing with a startup, you are typically dealing with the nonprofit version of an entrepreneur:  the social entrepreneur.  A desire to be involved in every area, every decision, to maintain a level of control over the outcome…it just makes sense.  And this is not exclusive to the realm of startups.  This issue afflicts the long-running organization, as well, particularly those run by a dominant personality (see our article on Founder’s Syndrome).  No matter how pervasive conflict-of-interest may be, it remains a potentially potent enemy of your organization and its effectiveness.

What follows is a self-assessment of your nonprofit’s level of conflict-of-interest.  Answer the questions, then check your score below.  The lower your score is, the lower your level of conflict-of-interest.

  • What percentage of your organization’s board of directors are also paid employees of the organization?
  • All of them (4 points)
  • Between 50-99% (3 points)
  • Between 25-49% (2 points)
  • Between 1-24% (1 point)
  • None (0 points)
  • What percentage of your organization’s board of directors are related to each other by blood, marriage or common ownership of an outside business?
  • All of them (4 points)
  • Between 50-99% (3 points)
  • Between 25-49% (2 points)
  • Between 1-24% (1 point)
  • None (0 points)
  • Does (or would) your nonprofit ever buy goods or services from a business controlled by a board member or key employee?
  • Yes, regularly (4 points)
  • Yes, occasionally (2 points)
  • Yes, but only when necessary (1 point)
  • Never (0 points)
  • Does (or would) your nonprofit ever promote the goods or services of a business controlled by a board member or key employee?
  • Yes, regularly (4 points)
  • Yes, occasionally (2 points)
  • Yes, rarely (1 point)
  • Never (0 points)
  • Does (or would) your nonprofit ever sell goods or services that result in direct financial benefit (royalties, commissions, etc.) to an insider?
  • Yes, regularly (4 points)
  • Yes, occasionally (2 points)
  • Yes, rarely (1 point)
  • Never (0 points)
  • Does (or would) your nonprofit ever lease property (land, buildings) from a board member or key employee?
  • Yes (3 points)
  • Yes, but only if no other suitable property was available (2 points)
  • No (0 points)

Let’s see how you did.  If you scored 0, congratulations.  You’ve done a great job of avoiding conflict-of-interest.  If you scored between 1 and 7, you are in pretty good shape.  Scores between 8 and 15 mean you have some things to examine.  If your score is between 16 and 23, you’ve may have some serious issues that need serious evaluation.

It is important to note that conflict-of-interest can exist without it resulting in illegal private benefit to insiders…but it makes avoiding it much more difficult.  The less conflict-of-interest your nonprofit has to deal with, the better.

Greg McRay, EA

Greg McRay, EA

Greg McRay is the founder and CEO of The Foundation Group. He is registered with the IRS as an Enrolled Agent and specializes in 501(c)(3) and other tax exemption issues.

This Post Has 6 Comments
  1. This was sent to me by an associate of mine and a client of yours and is very appreciated. I plan to talk with you soon about a new project our organization is about to embark upon. THANKS for the information. Dan

  2. I took the test and scored 0 in total score. It is God that our church is running things this way. “To God be the glory!”

  3. Greg, you got us our 501c3 and you continue to help with your outstanding articles. Thank you for everything!!!
    Mel

  4. This is great information and comes at a great time for our organization! The topics that you post are so valuable so thanks for all you do!

Comments are closed.

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