Annual conflict of interest disclosure questionnaire

Your conflict of interest policy sets the rules and ends with a short annual statement that people sign to say they've read and will follow it. This questionnaire goes further. It asks the specific questions that help your board spot conflicts before they happen, and gathers the information your Form 990 asks for, in one form people fill in once a year.

Why a questionnaire

The IRS instructions for Form 990, Part VI, explain several questions this form helps you answer:

• Line 12b asks whether officers, directors, trustees and key employees are required to disclose or update, annually or more often, "information regarding their interests and those of their family members that could give rise to conflicts of interest, such as a list of family members, substantial business or investment holdings, and other transactions or affiliations with businesses and other organizations and those of family members."
• Line 12c asks you to describe how you monitor transactions for conflicts and deal with them.
• Line 2 asks whether any officers, directors, trustees or key employees had a family or business relationship with each other during the year. The instructions say a reasonable effort to get this information is enough, and give as an example distributing a questionnaire each year with each person's name and title, a place to sign and date, and the instructions and definitions for line 2.
• Line 1b asks how many voting board members are independent. The instructions say the organization can rely on a questionnaire sent each year to each board member for this too.

Some states require annual disclosure by law. In New York, for example, Not-for-Profit Corporation Law § 715-a requires the conflict of interest policy to say that, before a director is first elected and every year after, the director completes, signs and submits a written statement identifying any entity they're an officer, director, trustee, member, owner or employee of that has a relationship with the corporation, and any transaction with the corporation in which they might have a conflicting interest. The statements go to the secretary or a designated compliance officer, who gives copies to the chair of the audit committee, or of the board if there's no audit committee. Check your own state's nonprofit law.

Key definitions from the Form 990 instructions

• Family includes a person's spouse, ancestors, brothers and sisters (whole or half blood), children (natural or adopted), grandchildren, great-grandchildren, and the spouses of brothers, sisters, children, grandchildren and great-grandchildren.
• Business relationships between two people include: one employing the other (or working for an organization where the other is a trustee, director, officer or greater-than-35% owner); doing business with each other worth more than $10,000 in total during the year, other than in the ordinary course of business on terms generally offered to the public; or both being a director, trustee, officer or greater-than-10% owner of the same business or investment entity. Attorney and client, medical professional and patient, and clergy and penitent relationships don't count.
• Independent board members, in short, weren't paid as an officer or employee, didn't receive more than $10,000 as an independent contractor (other than reasonable pay for serving on the board), and weren't involved, with their family, in a transaction reportable on Schedule L. Being a donor doesn't make someone not independent. See the instructions for the full test.

How to use it

• Send it at the same time every year, for example a month before your annual meeting, and to every new board member or officer before they start.
• Have the secretary collect the forms and give the chair (or the audit committee chair) a short summary of anything disclosed.
• Act on what you learn. A disclosure isn't a problem; a hidden conflict is. Follow your policy: the person discloses, steps out of the discussion and vote, and the minutes record it.
• Keep the signed forms with your board records, under your document retention policy.
• Use the answers for your Form 990, Part VI and Schedule L. Ask your accountant how they apply.