CONFLICT OF INTEREST

A conflict between an individual self-interest and the public good. Example: an organization that operates a day treatment program awards a food services contract to a local restaurant that is owned by a governing body member. From a legal standpoint, "conflict of interest" is a term used in connection with fiduciaries and their relationship to matters of private interest or gain to them. When used to suggest disqualification of a fiduciary from performing his or her sworn duty, the term refers to a clash between public interest and private pecuniary interest of the concerned individual.		  
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  POLICY

A written statement of principles, values, or intent that provides a basis for consistent decision making and guides the actions of staff, management, and board of trustees. A policy is intentionally broad in its language and application. The following is an example of an anti-discrimination policy:

"[Organization Name] shall not discriminate on the basis of race, color, religion (creed), gender, age, national origin (ancestry), disability, marital status, sexual orientation, or military status, in any of its activities or operations. These activities include, but are not limited to, hiring and firing of staff, selection of volunteers, selection of vendors, and provision of services."

In contrast, a procedure is a detailed, step-by-step description of a process. It tells the reader how to do something. Generally, policies are implemented through procedures. For example, the above anti-discrimination policy would require a detailed grievance procedure in order to operationalize it within an organization.

The governing body has the fiduciary responsibility for setting organizational policy. Therefore, policies must be approved and periodically reviewed by the organization's governing body. However, the governing body typically delegates (via policy) the responsibility for policy development to management. In owner-operated for-profit companies, the owner can act as the company's governing body, depending on the company's corporate structure.

In a public agency the responsibility for setting and reviewing policies may belong to the agency's management team, elected officials, another governmental agency, or as is often the case, a combination of the above.

  
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  PROCEDURES

Written instructions that outline the steps for performing a task(s) or operationalizing an administrative or service delivery process. A procedure can be written as a step-by-step set of instructions or as a narrative description of a process. A procedure tells someone how to do something not just what to do.

Unlike policies, procedures do not need to be approved or reviewed by the governing body, and need not be associated with a specific policy. For example, whereas a broad anti-discrimination policy requires grievance or other procedures in order to be operationalized within an organization, assessment procedures do not require a governing body approved assessment policy.

Note: Procedures are sometimes referred to as administrative policies.

  
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  MANAGEMENT

See ADMINISTRATION		  
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  DESIGNATED AUTHORITY

A body specifically empowered to, or having jurisdiction to, perform certain activities, such as review audits.		  
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  CONTRACT

A formal written agreement between two or more parties that specifies the services, space, or products to be provided in exchange for some form of compensation. Also known as "purchase of service arrangement."		  
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  SERVICE RECIPIENT

The individuals, groups, organizations, or communities that use, receive, or benefit from programs and services. Service recipients can include consumers, patients, family members, legal guardians, advocates, public/private organizations, employers, and purchasers. All are regarded as significant stakeholders served in a variety of agencies and practice settings.		  
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  ADVISORY GROUP

A group of individuals selected by an organization's governing body or management who possess unique skills and/or knowledge and whose role is to make recommendations, provide information, and/or share input from stakeholders. Advisory groups do not have formal governance authority or responsibilities. Advisory groups can be ongoing or ad hoc.		  
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  PERSONNEL

The body of employees and/or volunteers that carries out the organization's tasks under the organization's administration and/or supervision. This definition does not include foster parents who are specifically referenced in relevant standards		  
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  CONSULTANT

A person who provides specialized or technical advice or services to an organization for specific purposes on a contractual or fee basis, or who provides such services as a volunteer with an agreement to provide services on a pro bono basis.		  
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  SERVICE

One or more organization-operated programs or activities that have a common general objective and deploy the organization's material and human resources in a planned and systematic manner. An organization that publicly promotes or identifies itself in writing as offering a service, is licensed to deliver a service, assigns personnel and/or space to a service, or allocates financial resources to a service is considered to offer that service.		  
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  ASSESSMENT

An evaluation, which utilizes professional expertise and skills in the collection and analysis of data to understand and describe the nature of service needs of an individual, family, or group. Assessment, as in needs assessment, is also used to determine priorities of program planning and service development for the organization as a whole. See also DIAGNOSIS.		  
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  PRACTICE

Established actions or ways of proceeding in the regular performance of organizational duties. Policies and procedures often guide practice.		  
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Ethical Practice
  
Private Org Public Agency  

PA-ETH 2: Conflict of Interest*

 
The agency prevents the enrichment of insiders and other abuses through the adoption and enforcement of a conflict of interest policy consistent with state laws and regulations.
related PA-HR 1.03,  PA-RPM 2.01

Interpretation: COA does not define“conflict of interest,” and expects an agency’s policy to do so.

The Panel on the Nonprofit Sector, Interim Report, Section 4, Conflict of Interest Policy Disclosure contains a useful description of the Conflict of Interest issue. References to the Internal Revenue Code note that the Code defines a conflict of interest and that: “All states mandate that directors and officers owe a duty of loyalty to the organization, and improperly benefiting from a transaction involving a conflict of interest more than likely involves a violation of the duty of loyalty. Some state statutes specifically penalize participation in transactions involving conflicts of interests unless the organization follows certain prescribed procedures.”

Note: Please see Conflict of Interest Policy and Procedure Template in the Announcements section of your My COA account for additional assistance with this standard.

PA-ETH 2.01

 

A conflict of interest policy is tailored to the agency’s specific needs and characteristics, and:

  1. defines conflict of interest;
  2. identifies groups of individuals within the organization covered by the policy;
  3. addresses transactions between board members and the agency;
  4. addresses policy enforcement;
  5. provides a framework for evaluating situations that may constitute a conflict; and
  6. invests management with developing procedures that facilitate disclosure of information to prevent and manage potential and apparent conflicts of interest.
Interpretation: If an agency has a conflict of interest policy requiring signature of the designated authority, these signed forms should be available with the policy. The conflict of interest policy should ensure, among other things, that advisory members recluse themselves on matters where their objectivity could be compromised.

PA-ETH 2.02

 
Conflict of interest policies and procedures ensure that contracts and business arrangements serve the agency’s and service recipient’s best interests, not private interests.

PA-ETH 2.03

 

Advisory group members, personnel, and consultants who in any way have a financial interest in the agency'sassets, business transactions, leases, or professional services:

  1. disclose this information; and
  2. do not participate in any discussion or vote taken with respect to such interests.

PA-ETH 2.04

 
The network has a process for ensuring that its activities are carried out in an even-handed, principled manner and in the interests of service recipients.
related PA-ETH 1.03
Interpretation: It is essential that the network guard against any real or perceived conflict of interest in the manner in which it conducts its business, especially with regard to assessment, referral, and utilization management practices.
NA The agency is not a network management entity.
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PURPOSE: The agency earns and sustains the public trust through honest, truthful, and responsible transactions, partnerships, and relationships with individuals, communities, providers, businesses, donors, and government entities.
 
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