A compass between opposing magnets reflects the competing interests that a charity must recognise before making a decision.
Clear disclosure and independent judgment help a charity protect its purpose without treating every relationship as a wrongdoing
By Arbab Naseebullah Kasi, Chief Executive Officer - CEO, Feel Worldwide Foundation Inc.
Imagine a small charity choosing which neighbourhood project will receive its next grant. One application proposes evening activities for young people. The budget looks sensible, the venue is available and several trustees like the idea.
Then a trustee mentions that she is also the treasurer of the organisation applying for the money. She has helped that organisation prepare its budget. She believes strongly in its work and receives no payment from either charity.
Nothing in this invented example proves dishonesty. But the relationship changes how the decision needs to be handled. She has responsibilities to two organisations whose interests may differ over the same grant.
It would be uncomfortable to raise the issue after the award had been announced. Raising it early gives the charity a chance to decide who should assess the application, which rules apply and how the choice can be explained.
Conflicts of interest belong in ordinary governance, before there is an allegation to answer. A board needs a process people can use while they still like and trust one another.
The examples here are hypothetical. The regulator guidance cited comes from different jurisdictions and illustrates useful principles, not a single legal rulebook. A charity should follow the law and governing documents that apply to it, seeking qualified advice when the position is uncertain.
Notice the relationship before choosing the answer
A conflict is easier to recognise when a decision could put money directly into a trustee's pocket. It can be less obvious when the competing interest is loyalty to another organisation, a family relationship or a responsibility held elsewhere.
The Australian Charities and Not-for-profits Commission explains that relevant interests can extend to family, friends and other organisations. It distinguishes actual, potential and perceived conflicts. The question includes how an informed, reasonable observer might view the situation, rather than relying only on the individual's confidence in being impartial. Read the ACNC guide to managing conflicts of interest.
In our imagined grant decision, the trustee might sincerely believe the applicant is the best choice. Her knowledge may even be valuable. The problem is that the charity needs a fair basis for judging that belief alongside the other applications.
There are practical questions worth asking before the discussion gathers momentum. Who helped write an application? Who holds a role with an applicant? Does anyone have a relevant financial or family connection? Could someone owe duties to both sides of the proposed arrangement?
These questions work best when asked about the decision in front of the board. A general invitation to report anything unusual can leave people guessing about what counts. Naming the applications and the relationships that could matter gives everyone a clearer starting point.
Disclosure needs a next step
Suppose the trustee declares her connection and the chair replies, “Thank you, we all know you will be fair.” The meeting then continues exactly as planned, with the trustee leading the discussion and voting on the award.
That response acknowledges the information. It leaves unanswered what the board has done about it.
The IRS sample conflict of interest policy in the instructions for Form 1023 offers a useful illustration. It provides for disclosure of relevant facts, a determination by the remaining decision-makers and withdrawal of the interested person during discussion and voting on the affected transaction. It also addresses consideration of alternatives. The IRS expressly describes this as a sample, not a set of prescribed requirements, and says adopting a conflict policy is not itself required to obtain tax-exempt status. Read the IRS instructions and sample policy in Appendix A.
For the fictional grant panel, the next step should be decided under its own applicable rules. It might need factual information from the trustee, but it should establish the limits of her involvement before hearing advocacy for the application.
A useful distinction is between supplying information and controlling the choice. The applicant's opening hours may be a fact the panel needs. Whether that application should outrank another is the judgment the panel must make through its authorised process.
Treating those activities separately makes the conversation less personal. Nobody has to argue about whether a respected colleague is a good person. The board can focus on whether the decision has been protected from the competing interest.
Check whether the remaining people can decide
A trustee leaving the room can look like a complete solution. It may create another problem if the remaining members do not have authority to make the decision.
The Charity Commission's guidance for England and Wales tells trustees to check their governing document and have enough unconflicted trustees to meet the required quorum. For financial conflicts, its minimum approach includes disclosure, leaving the relevant discussion, not participating in the decision and not counting toward the quorum. It describes different options for loyalty conflicts depending on their seriousness. These are jurisdiction-specific instructions, not rules to assume apply everywhere. Read the Charity Commission's conflict guidance.
Our example becomes more difficult if a second trustee is also on the applicant's committee. The charity should find that out before the meeting reaches the vote, rather than improvising after people have left.
This is one reason to put conflict review near the start of preparing a decision. The administrator can flag a possible issue early enough for the chair to check the rules and seek advice. A late discovery can force a postponement that clearer preparation might have avoided.
An outside adviser may help the board understand an application. Their presence does not, by itself, answer whether the charity's governing body has the authority and independence required to approve it. That question still needs a proper answer.
Keep a record someone else can understand
Imagine a new trustee joining six months later and reading a minute that says only, “The grant was approved after discussion.” They cannot tell whether the relationship was disclosed, who participated or why the chosen project met the charity's aims.
A useful record gives enough detail to follow the decision without reconstructing it from people's memories.
The IRS sample policy calls for minutes recording the relevant financial interest, the action taken to determine whether a conflict existed, who attended the discussions and votes, alternatives considered and the voting record. This is a useful example of documenting the process as well as the outcome. See Article IV of the IRS sample policy.
For our fictional grant, a working record could identify the application, explain the trustee's role with the applicant, and state how the board handled her participation. It could then set out the criteria the eligible decision-makers used and the reasons for their choice.
The record should describe what happened. If the board postponed the matter for advice, it should say so. If information was missing, it should not make the discussion sound more complete than it was.
A clear account also helps the successful applicant. Its project can be understood through the decision criteria instead of leaving the award to be explained by personal connections.
Make it ordinary to speak up
A new board member may hesitate to mention an interest when long-serving colleagues behave as though everyone already knows everyone else's connections. A trustee may worry that disclosure will be heard as a confession.
Leaders can make that moment easier. A calm response such as “Thank you for flagging it; let us check the process” keeps attention on the task. A sarcastic comment or a hurried dismissal makes the next disclosure harder to raise.
The ACNC recommends an up-to-date register of interests, regular attention to conflicts at meetings and a supportive culture in which people can disclose concerns. Its guidance treats identifying and managing conflicts as a shared responsibility. Read the ACNC's guidance on disclosure and registers.
For a small charity, it helps to make the procedure usable. A new trustee should know where to report a relevant connection, who reviews it and what happens if that person is also involved. The route should be available between meetings, because relationships and proposals can change between meetings too.
A short fictional exercise can expose uncertainty. Present the grant example and ask each board member what they would do first. If the answers differ sharply, use that difference to clarify the procedure before a real application depends on it.
The aim is not to reward the board that reports the fewest interests. A quiet register may reflect a straightforward situation, or it may reflect a process people do not understand. The board needs to look at how the process is being used.
Some conflicts require a different arrangement
There are situations in which a familiar withdrawal-and-vote routine will not be enough. Several decision-makers may share the same interest. A recurring conflict may remove a trustee from much of the work they were appointed to do.
The ACNC's template policy asks charities to consider what happens when all board members share a conflict. Possible responses include professional advice and consideration of changes to board membership or other permitted routes. It also prompts organisations to specify who can access disclosed information. The template is intended for adaptation to the charity's circumstances. Read the ACNC conflict of interest policy template.
In the imagined grant case, slowing down may feel frustrating when a project is waiting for an answer. But the board should not promise an award while the authority to make it remains unresolved.
The applicant deserves a clear update about the timetable without being drawn into internal speculation. Staff need to know whether they can proceed. The charity can communicate that a governance review is underway while protecting information that should remain confidential.
There may also be a simpler alternative to the proposed arrangement. The board should be willing to consider it, rather than treating the first plan as something that must be rescued at any cost.
Protect the decision while preserving respect
I would like more organisations to make this conversation routine enough that it does not require unusual courage. A trustee should be able to disclose a connection without being treated as an adversary. Colleagues should be able to ask for safeguards without being accused of disloyalty.
At the next appropriate meeting, a board could test one recent decision against three practical questions: Were the relevant interests known before the decision? Was participation handled under the right rules? Can the record explain what happened and why?
If the answers are unclear, that gives the organisation a specific improvement to make. It might need a better induction, an updated register, advice on its governing document or a more useful meeting record.
The fictional grant may still go to the same project. A sound process does not promise a different result. It gives the charity a defensible way to reach the result and an honest account of how it got there.
Relationships bring experience and commitment into community work. Responsible leadership makes room for those contributions while keeping the charity's purpose at the centre of its decisions.
