Sustainable Farming Association
Conflict of Interest Policy
Approved by Executive Committee
September 4, 2015
Section 1: Purpose
The intention of this policy is to avoid conflicts and potential conflicts of interest between Sustainable Farming Association and those connected to this organization, with the understanding that the interest of Sustainable Farming Association supersedes all other interests.
No member of the SFA Board of Directors, or any of its Committees, Chapters or Networking Groups shall derive any personal profit or gain, directly or indirectly, by reason of his or her participation with Sustainable Farming Association. Each individual shall disclose to SFA any personal interest which he or she may have in any matter pending before SFA and shall refrain from participation in any decision on such matter.
1.1) This policy intends to cover the board of directors, staff, contractors and volunteers of the organization, in recognition of:
- the statutory requirement by the State of Minnesota to cover board directors (State Nonprofit Corporation Act, Chapter 317A)
- the Internal Revenue Service suggestion to cover the board, officers and key employees (Form 990, Part VI, Section B)
1.2) The types of conflict addressed in this policy include material financial interest, personal benefit, private interest, and personal financial, professional or political gain.
1.3) This policy is supplementary to the current statute which controls.
Section 2: Definitions
A conflict of interest exists when someone with a fiduciary responsibility is in a situation where their own self-interest and the interests of the organization might be in conflict, where that person’s obligation to further the organization’s charitable purposes is at odds with their own financial interests.
2.1) “Interested Person”: Any director, principal officer, or member of a committee with governing board delegated powers, who has a direct or indirect financial interest, as defined below, is an interested person.
2.2) “Financial Interest”: A person has a financial interest if the person has, directly or indirectly, through business, investment, or family:
(a) An ownership or investment interest in any entity with which the corporation has a transaction or arrangement;
(b) A compensation arrangement with the corporation or with any entity or individual with which the corporation has a transaction or arrangement; or
(c) A potential ownership or investment interest in, or compensation arrangement with, any entity or individual with which the corporation is negotiating a transaction or arrangement.
2.3) “Material Facts”: Material facts are facts that would be to a reasonable person germane to the decision to be made as distinguished from an insignificant, trivial or unimportant detail. In other words, it is a fact which if expressed, could reasonably result in a different decision on the matter at hand.
Compensation includes direct and indirect remuneration as well as gifts or favors that are not insubstantial. A financial interest is not necessarily a conflict of interest. Under Section 3.2, a person who has a financial interest may have a conflict of interest only if the board of directors or appropriate committee decides that a conflict of interest exists.
Section 3: Procedures
3.1) Duty to Disclose
In connection with any actual or possible conflict of interest, an interested person must disclose the existence of the financial interest and be given the opportunity to disclose all material facts to the directors and members of committees with governing board delegated powers considering the proposed transaction or arrangement.
Furthermore, every meeting of the board of directors shall include in the agenda a call for disclosure of any actual or possible conflicts of interest that have not been disclosed in advance of the meeting. This will occur at or near the beginning of the meeting.
3.2) Determining Whether a Conflict of Interest Exists
After disclosure of the financial interest and all material facts, and after any discussion with the interested person, he/she shall leave the board meeting or committee meeting while the determination of a conflict of interest is discussed and voted upon. The remaining board or committee members shall decide if a conflict of interest exists.
3.3) Procedures for Addressing the Conflict of Interest
(a) An interested person may make a presentation at the governing board or committee meeting, but after the presentation, he/she shall leave the meeting during the discussion of, and the vote on, the transaction or arrangement involving the possible conflict of interest.
(b) The chairperson of the governing board or committee shall, if appropriate, appoint a disinterested person or committee to investigate alternatives to the proposed transaction or arrangement.
(c) After exercising due diligence, the governing board or committee shall determine whether SFA can obtain with reasonable efforts a more advantageous transaction or arrangement from a person or entity that would not give rise to a conflict of interest.
(d) If a more advantageous transaction or arrangement is not reasonably possible under circumstances, the governing board or committee shall determine by a majority vote of the disinterested directors whether the transaction or arrangement is in the corporation’s best interest, for its own benefit, and whether it is fair and reasonable. In conformity with the above determination it shall make its decision as to whether to enter into the transaction or arrangement.
3.4) Violations of the Conflicts of Interest Policy
(a) If the board has reasonable cause to believe a director, staff member or volunteer has failed to disclose actual or possible conflicts of interest, it shall inform that person of the basis for such belief and afford the member an opportunity to explain the alleged failure to disclose.
(b) If, after hearing the interested person’s response and after making further investigation as warranted by the circumstances, the board determines the member has failed to disclose an actual or possible conflict of interest, it shall take appropriate disciplinary and corrective action.
Section 4: Records of Proceedings
The minutes of the board and all committees with board delegated powers shall contain:
(a) The names of the persons who disclosed or otherwise were found to have a financial interest in connection with an actual or possible conflict of interest, the nature of the financial interest, any action taken to determine whether a conflict of interest was present, and the board’s decision as to whether a conflict of interest in fact existed.
(b) The names of the persons who were present for discussions and votes relating to the transaction or arrangement, the content of the discussion, including any alternatives to the proposed transaction or arrangement, and a record of any votes taken in connection with the proceedings.
Section 5: Review of Policy
To ensure that SFA operates in a manner consistent with charitable purposes and does not engage in activities that could jeopardize its tax-exempt status, periodic reviews shall be conducted. The periodic reviews shall, at a minimum, include determining whether partnerships, joint ventures, and arrangements with other corporations or individuals:
- conform to SFA’s written policies;
- are properly recorded;
- reflect reasonable investment or payments for goods and services;
- further charitable purposes and mission of SFA;
- do not result in impermissible private benefit.
The State of Minnesota considers potential for conflict in a transaction or contract between:
- an organization and its directors;
- a common director with a related organization;
- a common director with another organization; and
any family members therein involved.
Chapter 317A requires that any potential conflict transaction or contract be “fair and reasonable” to the organization when approved, that the “material facts” of the matter be fully disclosed and known to all parties to a transaction or contract and to the board or appropriate committee for good faith approval. It also requires that the vote of the potentially interested director not count in a Board’s authorization or ratification process. M.S.A. § 317A.255 (2009).
Under Minnesota state law, a contract between a nonprofit corporation and a board member or members may be voidable unless the interested board member or members can establish that:
- The contract is fair and reasonable;
- Full disclosure by the interested board member or members was made to the full board or voting members;
The IRS Form 990 asks in Part VI, Section B,
- Question 12a: Does the organization have a written conflict of interest policy?
- Question 12b: Are officers, directors or trustees, and key employees required to disclose annually interests that could give rise to conflicts?
- Question 12c: Does the organization regularly and consistently monitor and enforce compliance with the policy?