A. Dealing with Conflicts of Interest
- Adopt a written conflict of interest policy that addresses, for all insiders, how conflicts are identified and avoided or managed.
- Document the disclosure and management of actual and potential conflicts.
- When engaging in any transaction with an insider:
- Follow the conflict of interest policy.
- Contemporaneously document that there is no private or undue benefit.
Background
A conflict of interest arises when insiders are in a position, or perceived to be in a position, to benefit in some way, commonly financially (or create a benefit to a family member or other organization with which they are associated) by virtue of their position within the non-profit organization. The best way to address conflicts of interest is to understand how they may arise; make board members and others aware of the need to avoid conflicts; require board members, staff and other insiders to disclose any potential conflicts; and establish a policy for dealing with conflict problems as they arise. The Canadian Land Trust Standards and Practices recommends that all land trusts have a conflict of interest policy. The policy should identify who is covered by the policy, identify the types of conduct that raise conflict of interest concerns (such as a financial interest in a transaction, personal relationships that might unduly influence a land transaction or land management action, or being on the governing body of a contributor to the organization) and specify how conflicts should be disclosed and managed. Each board and staff member should have a copy of the policy.
Insiders are considered persons who are in a position to exercise substantial influence over the affairs of the organization. Insiders generally include; board members, key staff, substantial contributors and parties related to board and staff members or substantial contributors within the meaning of the Income Tax Act. While these are strict definitions within the tax code, land trusts are advised to take an even more proactive approach to reduce or eliminate the potential damage that conflicts of interest may cause an organization and also include in the definition of insiders all staff members and those with access to information not available to the general public (such as certain volunteers). The term related persons is defined by the CRA to include individuals who are related to each other by blood, marriage or adoptions. Examples include spouses, brothers and sisters, spouses of brothers and sisters, ancestors, children, grandchildren, great-grandchildren, and spouses of children, grandchildren and great-grandchildren. Generally, common law partners are treated in the same way as legally married spouses. Adopted children are treated in the same way as blood- related children. Related persons also include individuals or groups and the corporations in which they have a controlling interest. Persons related to these individuals or groups are also considered related to those corporations. For more information, land trusts should refer to CRA Interpretation Bulletin IT-419R.