The Nonprofit FAQ
| My Board member says to use his/her relative as a vendor. |
| Someone wrote to NONPROFIT in August 1999 and asked: I am new to the non-profit world and am unclear on what is and is not considered a conflict of interest. I have no reason to suspect any dishonesty in this situation, but feel less than comfortable with it. What do you think about a venders being members of committees? For example, say A.Video Production Co has just made a $10,000. promotional video for Fictitious Nonprofit. The administration of Fictitious Nonprofit have asked 2 representatives of A. Video Production Co. to sit on their public relations committee. A Video Production Co. offers other services related to public relations for a fee and have made solicitations for additional business during P.R. committee meetings. What do you think? There were several answers taking different points of view: Channing Hillway, Ph.D. wrote: This sort of situation comes along occasionally on the various nonprofit lists to which I subscribe. The discussion always leads in the same direction. Anyone making money from any type of participation in a nonprofit as a volunteer is bending the rules. When the people are in leadership positions, they are certainly being unethical. If members of an organization present sealed bids and stay out of the bid review process, a case can be made for their being allowed to provide a product or service. But it still casts a pall over the life of the nonprofit. Best advice: Never do it. Furthermore, if a board member makes money through an affiliation with a nonprofit, it may be illegal and subject to prosecution under the law. It depends on a number of factors, such as how many board members are engaging in such deals, etc. But it is wise to establish a clear policy in your organization's bylaws prohibiting board members and other participants in the organization from making any money through their participation there. Only staff members and consultants should be paid for their services, and business people with no connection to the organization. Bill Robson had a slightly different take on the question: Getting close to a Conflict of Interest. If the committee members are "hired to do work" or receive a contract from the balance of the committee, I'd suggest keeping all competitive bids on file to show the rationale for such a decision. Best solution is the Video Reps do not tender any bids on jobs and/or do not take part in any discussions or vote on which vendor to hire. Acting as a consultant only, giving free advice and staying out of the race for the work would clear up any suggestion of a conflict. At a Board level this type of conflict could be grounds for losing a Charter as a NPO. Also, I've seen regular members throw out a Volunteer Board for a conflict of a lesser nature than this one..... Tony Poderis (http://www.raise-funds.com) made a similar point: I suspect you know the situation you describe is certainly a conflict-of-interest situation. It's okay for any vendor to propose his or her services to a non-profit, but not from a position of being on a volunteer standing committee and exerting undue policy - making influence from that inside vantage point. What they surely will do is to propose initiatives, ostensibly to benefit the organization, but at the same time they will have an inside track to promote their services. Other vendors will not have an equal opportunity and the vendors - PR committee members you have in place can intentionally or inadvertently promote their own self-interests at your expense --- literally and figuratively. I believe they should be removed from the committee as soon as possible if they do not desist with their overt self-promotion. A reader named Avagara saw it differently: Assuming that Video Production Co. has real PR competence (though the hypothetical you presented suggests that they do _not_ have the necessary finesse), here are some suggestions:
This is a win-win situation: Fictitious Nonprofit gets PR at a deep discount, the ED gets on TV, the Video Production Co. gets paid, gets community exposure as one of the "good guys," gets a portfolio piece & a reference. Long ago, Ina Frank answered a similar question in NONPROFIT-L and her early answer was recorded in the FAQ under the title of this item -- What if a board member wants to have us use a brother-in-law as a vendor? OK as long as the price is competitive, the service policy as good or better and the Board member doesn't "benefit materially." It won't look terrific, but you can keep things both legal and friendly. [See http://www.nonprofits.org/npofaq/16/59.html for more on related themes.] Good plan: Shop. Get 3 bids on the *identical* system. One can be from brother-in-law. Keep it businesslike and cordial, verbally welcoming brother-in-law's quote openly and warmly. If it's considerably more, let board member know and ask his/her *advice*. In keeping with the Board's fiduciary responsibility (what they are allowed to do with funds received by a nonprofit) it would not be right to advise you to spend more than is needed, even to keep the family happy. For more discussions of Conflict of Interest, see http://www.idealist.org/en/faqcat/9-3 Revised and expanded 8/27/99 -- PB |