Compliance Management
Governance, Risk Management and Compliance (GRC)
Nonprofit Management
Nonprofit Conflict of Interest Policy: Template, Annual Disclosures and Form 990 Reporting
Last updated: October 11, 2026 · Independent guide · We do not sell rankings or coverage.
A conflict of interest policy for a nonprofit is a board-adopted document that defines who is covered, what counts as a financial interest, and how the board handles and records disclosures. Federal tax law does not require a 501(c)(3) to adopt one, but Form 990 asks about it on Part VI, lines 12a to 12c, and the IRS publishes a sample policy in the Form 1023 instructions. Below are a policy template built on that sample, an annual disclosure questionnaire, and a Form 990 crosswalk.
How to use this template
Part 1 is the policy your board adopts by resolution, Part 2 is the questionnaire each covered person completes every year, and Part 3 maps both to your Form 990 answers. Replace “the Organization” with your legal name, have counsel check the text against your state’s nonprofit law, and minute the adoption date, because the IRS only counts a policy adopted by the end of the tax year.
Part 1: Conflict of interest policy template
This text condenses the IRS Instructions for Form 1023, Appendix A (Rev. December 2024), which the IRS says “does not prescribe any specific requirements.” We omitted the hospital inserts and numbered Periodic Reviews as Article VII, which the IRS sample leaves unnumbered even though its Article VIII refers to it.
| Article | Policy text (adapt to your organization) |
|---|---|
| I. Purpose | To protect the Organization’s interest when it considers a transaction that might benefit an officer’s or director’s private interest or result in an excess benefit transaction. This policy supplements state and federal law. |
| II.1 Interested person | Any director, principal officer, key employee or member of a committee with board-delegated powers who has a direct or indirect financial interest is an interested person. |
| II.2 Financial interest | A person has a financial interest if, directly or indirectly, through business, investment or family, the person has (a) an ownership or investment interest in an entity the Organization transacts with; (b) a compensation arrangement with the Organization or with anyone it transacts with; or (c) a potential ownership, investment or compensation interest involving anyone it is negotiating with. (d) Compensation includes gifts or favors that are not insubstantial. A financial interest is not necessarily a conflict. |
| III.1 Duty to disclose | The interested person must disclose the financial interest and all material facts to the board or committee considering the transaction. |
| III.2 Determining a conflict | After disclosure and discussion, the interested person leaves the meeting. The remaining members decide whether a conflict of interest exists. |
| III.3 Addressing the conflict | The interested person may present, then leaves for the discussion and vote. The chair may appoint a disinterested person to investigate alternatives. If no better non-conflicted arrangement is reasonably available, a majority of disinterested directors decides whether the transaction is in the Organization’s best interest and fair and reasonable. |
| III.4 Violations | If the board believes a member failed to disclose, it informs the member and hears an explanation. If it confirms the failure, it takes disciplinary and corrective action. |
| IV. Records of proceedings | Minutes record who had a financial interest, its nature, the conflict determination, who was present, alternatives considered and the votes taken. |
| V. Compensation | A compensated voting member may not vote on their own compensation but may provide information to the committee. |
| VI. Annual statements | Each director, principal officer and member of a committee with board-delegated powers signs an annual statement affirming they received, read, understand and will comply with this policy, and that the Organization must engage primarily in exempt-purpose activities. |
| VII. Periodic reviews | The Organization periodically reviews whether compensation is reasonable, based on competent survey data and arm’s length bargaining, and whether joint ventures and management arrangements are properly recorded and avoid inurement, private benefit or excess benefit. |
| VIII. Outside experts | Outside advisors may help with periodic reviews; the board remains responsible for them. |
We added key employees to Article II.1 because line 12b covers them, and recommend that Article VI require the Part 2 disclosure.
Part 2: Annual disclosure questionnaire
Send this to every director, officer and key employee each year before the fiscal year closes. The last column shows where each answer is used on Form 990.
| # | Question | Response format | Used for |
|---|---|---|---|
| 1 | List your family members (spouse, ancestors, siblings, children, grandchildren, great-grandchildren, and their spouses). | Names and relationship | Line 12b; Part VI line 2 |
| 2 | Do you or a family member own or hold an investment in any business that does business with, or is negotiating with, the Organization? | Yes/No; entity, nature of interest | Policy Art. II.2(a); line 12b |
| 3 | Do you or a family member have a compensation arrangement with the Organization, or with a person or business that transacts with it? | Yes/No; payer, description | Policy Art. II.2(b); Part VI line 1b |
| 4 | List businesses and other organizations where you serve as an officer, director, trustee, partner or employee. | Organization, role | Line 12b affiliations |
| 5 | Do you have a family or business relationship with any other officer, director, trustee or key employee of the Organization? | Yes/No; names, relationship | Part VI line 2 |
| 6 | During the year, were you, a family member or an entity you are affiliated with party to any loan, grant, contract or other transaction with the Organization or a related organization? | Yes/No; parties, amount, date | Schedule L; Part VI line 1b |
| 7 | Did you receive more than $10,000 from the Organization and related organizations as an independent contractor, other than reasonable pay for board service? | Yes/No; amount | Part VI line 1b independence |
| 8 | Did you or a family member receive gifts or favors that are not insubstantial from anyone doing business with the Organization? | Yes/No; source, description | Policy Art. II.2(d) |
| 9 | Are you aware of any other interest or relationship that could give rise to an actual or possible conflict that you have not already disclosed? | Yes/No; description | Policy Art. III.1 |
| 10 | Affirmation: I have received, read and will comply with the policy, understand the Organization must engage primarily in exempt-purpose activities, and will update this disclosure if my circumstances change. | Signature, printed name, date | Policy Art. VI; line 12b |
Question 1 uses the family definition in the Form 990 instructions glossary, and question 7 uses the $10,000 contractor threshold from the line 1b independence test.
Part 3: Form 990 Part VI crosswalk
The 2025 Form 990 asks three linked questions in Part VI, Section B. Every Form 990 filer must answer them, although the instructions say these policies generally are not required by the Internal Revenue Code.
| Line | Question on the form | What supports “Yes” | Evidence to keep |
|---|---|---|---|
| 12a | Did the organization have a written conflict of interest policy? | A written policy adopted by the board (or an authorized committee) by year end that applies to the whole organization | Signed policy, adopting resolution, minutes |
| 12b | Were officers, directors, or trustees, and key employees required to disclose annually interests that could give rise to conflicts? | An annual (or more frequent) disclosure requirement covering their interests and those of family members | Completed Part 2 questionnaires, tracking log |
| 12c | Did the organization regularly and consistently monitor and enforce compliance with the policy? If “Yes,” describe on Schedule O how this was done. | A working process for reviewing transactions, recusals and follow-up on late or missing disclosures | Minutes showing recusals, reviewer notes, Schedule O text |
For line 12c, the instructions ask Schedule O to explain who is covered, at what level conflicts are determined and reviewed, and what restrictions apply to a conflicted person. The wording below is an illustration only.
Illustration: “The policy covers all directors, officers, key employees and board committee members, who complete a written disclosure questionnaire annually. The board secretary reviews responses and reports potential conflicts to the governance committee, which determines whether a conflict exists. The full board reviews actual conflicts. A conflicted person leaves the meeting for the discussion and vote, and the minutes record the determination and vote.”
Walking through each part of the template
Coverage. Article II.1 and your questionnaire distribution list must match. Line 12b names key employees, so leaving them out weakens a “Yes” answer.
Interest versus conflict. A disclosed interest becomes a conflict only when the disinterested members decide it is one, so minute that decision.
Live transactions. Article III applies when a related item reaches the agenda, so check each agenda against the disclosure log before the board packet goes out.
Minutes. Article IV is your proof for line 12c. “Director X abstained” does not show who decided a conflict existed or what alternatives were considered.
Common mistakes
- Adopting after year end. The instructions count a policy only if the board adopted it by the end of the tax year.
- Division-level policies. If a policy applies only to one division, the instructions say to answer “No.”
- Affirmation without disclosure. The IRS sample’s Article VI only requires an acknowledgment. Line 12b asks about disclosing interests.
- Collecting but not reviewing. Unreviewed questionnaires do not show the organization “regularly and consistently” monitored compliance under line 12c.
- Not feeding Schedule L. Transaction answers should reach whoever prepares Schedule L and the line 1b independent director count.
When to move from a spreadsheet to a board portal
A spreadsheet works for a small board until you need reminders, prior-year answers carried forward and signed copies stored with board records. Three board management platforms handle annual disclosures in different ways, based on what each vendor publishes.
BoardEffect. BoardEffect uses its built-in surveys and polls. Its December 3, 2024 blog post says administrators can collect conflict of interest information, send reminders, template recurring surveys and allow confidential responses. Its solutions page lists digital signatures. We found no published detail on export formats. BoardEffect’s site footer carries a Diligent Corporation copyright.
OnBoard. OnBoard’s D&O Questionnaires page (no date shown) says the feature suits conflicts of interest questionnaires, with reusable templates, pre-filled data, integrated eSignatures and export to PDF, Word or an OnBoard resource folder. Its March 6, 2026 help article says directors find questionnaires under Awaiting Response or Actions, and admins review submissions and can revoke one to request updates. A 2021 announcement called it an optional add-on, and OnBoard’s pricing page now lists D&O Questionnaires in the Ultimate plan and in a Board governance tools add-on for the Premium plan.
Diligent Boards. Diligent’s help center (October 9, 2026) calls Questionnaires “an add-on function to the Boards product” for D&O surveys, with year-over-year comparison, progress tracking and response reporting. The pages we reviewed do not describe signing or export steps.
None of the three publishes dollar pricing for these features on the pages we reviewed. For broader controls, see nonprofit compliance and risk management software; for the transaction data behind Schedule L, see nonprofit accounting software.
How we researched this
On October 11, 2026 we read IRS Appendix A, the Form 990 Part VI instructions and glossary, and the 2025 Form 990, plus vendor documentation from BoardEffect, OnBoard and Diligent. This is general information, not legal or tax advice.
Related guides
- Form 990 Schedule A: The Public Support Test Explained
- Restricted Funds Accounting: Restrictions and Releases
- Nonprofit Chart of Accounts Template (Form 990 Mapped)
Frequently asked questions
Is a conflict of interest policy required for a 501(c)(3)?
Not under federal tax law. The Form 1023 instructions say adoption “isn’t required to obtain tax-exempt status,” but Form 990 asks about it on line 12a. Check your state’s nonprofit law with counsel.
Who has to sign the annual conflict of interest statement?
Under the IRS sample, each director, principal officer and member of a committee with board-delegated powers signs annually. Form 990 line 12b also names key employees, so include them.
What do I write on Schedule O for line 12c?
Describe who the policy covers, who decides whether a conflict exists, who reviews actual conflicts, and what restrictions apply to a conflicted person. Describe what you actually did during the year.
Can a board portal replace the signed paper form?
It can, if you can retrieve each year’s signed response and reviewer notes. Confirm with the vendor how long submissions are kept and how they export.
Sources
- IRS, Instructions for Form 1023 (Rev. December 2024), Appendix A: Sample Conflict of Interest Policy and Part V line 2, page last reviewed April 30, 2026. irs.gov
- IRS, Instructions for Form 990 (2025), Part VI lines 1b, 2 and 12a to 12c, Section B introduction and glossary, page last reviewed April 30, 2026. irs.gov
- IRS, Form 990 (2025), Part VI, created April 30, 2025. irs.gov
- BoardEffect (vendor), blog post on BoardEffect surveys and polls, December 3, 2024. boardeffect.com
- BoardEffect (vendor), annual board meetings cycle solution page, no date shown. boardeffect.com
- OnBoard (vendor), D&O Questionnaires product page, no date shown. onboardmeetings.com
- OnBoard (vendor), Help Center, Completing Questionnaires, updated March 6, 2026. help.passageways.com
- OnBoard (vendor), announcement of D&O questionnaire capabilities, January 4, 2021, updated March 23, 2022. onboardmeetings.com
- OnBoard (vendor), pricing page, no date shown. onboardmeetings.com
- Diligent (vendor), Diligent Boards Help, Questionnaires overview, published October 9, 2026. help.diligentoneplatform.com
- Diligent (vendor), Diligent Boards Help, D&O questionnaires, published October 9, 2026. help.diligentoneplatform.com
Sherman Hsieh
Independent analysis of enterprise software — ERP, CRM and more
