‘I run a small business supplying stationery and my business partner wants to send a proposal to the charity of which I am a director – is that ok?’
‘I am a director of two charities which often bid for the same grants. Should I resign from one of the charities?’
‘My brother is applying for a job at the charity of which I am a director – do I need to tell the
interviewing panel?’
What due process must be applied to situations such as the above to sustain a transparent and liability-free charity, rid of any conflict of interest?
1. Identifying a conflict of interest
The first step in properly managing conflicts of interest is identifying the conflict situation. A conflict of interest arises when your personal interests come into conflict with your responsibility as a board member to act in the best interests of the charity.
The conflict may be actual (i.e. you are being influenced by a conflicting interest), potential (i.e. you could be influenced by a conflicting interest), or perceived (i.e. you could appear to be influenced by a conflicting interest).
2. Duty to disclose an interest
The responsible persons (e.g. directors) of registered charities must disclose any situation where they may have an actual, potential or perceived conflict between a personal interest and their duty to act in the interests of the charity (ACNC governance standard 5). Responsible persons should be asked to disclose any personal interests at the time of their appointment.
There are various sources of law for the duty to disclose an interest depending on the legal structure of the organisation. If you are not sure whether something should be disclosed, it is recommended to be cautious – raise it with your fellow board members. Better safe than sorry.
2. Duty to disclose an interest
The responsible persons (e.g. directors) of registered charities must disclose any situation where they may have an actual, potential or perceived conflict between a personal interest and their duty to act in the interests of the charity (ACNC governance standard 5). Responsible persons should be asked to disclose any personal interests at the time of their appointment.
There are various sources of law for the duty to disclose an interest depending on the legal structure of the organisation. If you are not sure whether something should be disclosed, it is recommended to be cautious – raise it with your fellow board members. Better safe than sorry.
3. Managing the conflict
Once a conflict has been disclosed it must be properly managed. For example: if you are conflicted in a particular situation, such as a decision about whether the charity should sign a contract, ACNC governance standard 5 would require you not to discuss or vote on the matter.
4. Recording the conflict
A conflict of interest should be recorded in the board minutes of the meeting at which it was disclosed. It is important to have a record of the conflict being managed properly.
5. Conflicts of interest policy
It is important that your organisation has a clear policy covering the above matters. The board is responsible for ensuring that the policy remains up-to-date and is implemented properly.
If you would like advice about conflicts of interest or a conflicts of interest policy, please contact us. Warlows Legal are experts on charity law and conflicts of interest.
