Developing a Conflict of Interest Policy Evidence2Success

PHASE 2

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Developing a Conflict-of-Interest Policy

Conflicts of interest may occur when individuals in positions of trust and authority have a decision-making

role in one or more organizations where personal and professional interests overlap. Generally, in

Evidence2Success, a conflict of interest is a situation in which a decision maker (such as a community

board or committee or work group member) has the potential to benefit personally from his or her

decisions as a participant in Evidence2Success. Conflicts of interest can be problematic because they

can result in decisions that are not in the collective best interests of the local Evidence2Success effort.

Moreover, such situations can erode the trust of those affected by the decision as well as all

Evidence2Success stakeholders in the community. The benefit can be financial (direct or indirect), or it

can take other forms, such as improved networking opportunities, publicity, social or business

advancement, referrals, or even political influence or favors. Personal or organizational benefits may be

received by the decision maker or by a family member. Real or apparent conflicts of interest can open the

door to ethics questions that cast a shadow over an organization’s work and reputation, even when no

one is receiving a personal benefit. This is especially true when public funds are involved.

Nevertheless, conflicts of interest are not necessarily bad in their own right. Positive outcomes can arise

from having individuals who are personally invested in decision-making roles. The director of a large child

welfare agency might be the perfect person to lead an initiative relating to child welfare practice, for

example. The perspective and level of commitment such a person brings to the role can be invaluable. In

fact, conflicts of interest are a natural reality of collaborative efforts affecting multiple stakeholders, but

they must be acknowledged and addressed in a way that is ethical and transparent. Actual or potential

conflicts of interest should not preclude individuals from participating in Evidence2Success.

Since conflicts of interest are unavoidable, the community board needs to be vigilant about potential

conflicts of interest and needs to be prepared well in advance with a conflict-of-interest policy that can be

applied to all scenarios. This document provides guidelines for defining a conflict-of-interest policy for

your Evidence2Success effort. It is intended for use in a team setting to spur discussion.

Types of Conflict of Interest

Conflicts of interest can occur in any phase of Evidence2Success. Two of the more common types (and

one variation) are shown in the illustrations below.

In the first type, a high-level employee of a public agency (Person A) has a personal relationship (such as

a marriage) with a corporate officer of a service provider agency (Person B). The public agency has a

contract with the service provider. For example, suppose A is the superintendent of schools, and the

district has issued a request for quotations (RFQ) for implementation of a particular program within the

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district’s middle schools. Suppose that B is the CEO of the service provider and that A and B are married.

B’s organization is responding to the RFQ. The diagram below illustrates this scenario. Do you see a

potential problem?

The conflict here lies in (1) the financial benefit that might come to B if the service provider is awarded

the contract and (2) the behind-the-scenes influence that B might be able to exercise on A to steer more

work to the service provider. If A and B are married, this could even be considered self dealing, as any

benefit coming to one member of the couple is actually a benefit for both.

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The next illustration shows a similar situation. Here, a similar situation exists, but A and B do not have a

personal friendship or relationship. Instead, A is married to Person C, who works in a position of authority

in the service provider agency (but C is not necessarily an officer). If the public agency and service

provider enter into a contract, C will benefit personally, and so will A. This is the conflict of interest in this

situation.

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A type of conflict of interest is illustrated in the next diagram. One person has a duty to two different

organizations whose interests do not necessarily coincide. For example, suppose that the community is

home to a large for-profit service provider regarded as a crucial partner in the local Evidence2Success

initiative. Person C, as the director of the service provider agency, sits on the community board and

chairs the data committee. The data committee has suggested priority outcomes and risk and protective

factors for the board to consider. Suppose also that the service provider is already a purveyor of a tested,

effective program that addresses one of the risk factors on the list. The community board will soon

choose programs to address selected priority outcomes and risk and protective factors. Do you see the

potential for conflicting interests for C?

In this case, the conflict lies in C’s influence on the list of possible priorities, since C might be able to

steer the workgroup into selecting priorities that C’s organization is already experienced in addressing

through the services it already provides in its current program offerings.

Many conflict of interest situations are likely to be variations on the scenarios described above. As a

result of the level of collaboration that Evidence2Success encourages, it is natural and likely for potential

conflicts of interest to arise — not just on the community board but throughout the initiative. Constant

vigilance is needed.

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Appearance Versus Reality

You may have noticed that we’re defining conflict of interest in terms of the potential for personal benefit.

In other words, no one has to receive an actual material benefit. The potential alone should trigger

scrutiny. After all, appearances matter: anyone in the community who is aware of the potential for benefit

will be looking closely at the situation. Even if no unethical dealings occur, the very question can diminish

trust. Thus, you should realize that a real conflict of interest is just as problematic as a perceived conflict.

For this reason the community board needs to be transparent about its dealings and its decision-making

procedures. Potential conflicts of interest must be addressed proactively at the earliest possible moment.

Managing a Conflict of Interest

As described above, a conflict of interest is not necessarily bad. Most conflicts of interest can be

addressed using a four-step analysis process:

1. Identify and disclose a potential or existing conflict of interest.

2. Identify the risk of harm and potential benefits as concretely as possible.

3. Ascertain what level of risk is acceptable to the community board.

4. Reduce the risk to a tolerable level.

For step 3, board members may want to ask themselves if they’d feel comfortable explaining their

decision to a community resident. They could apply a “front-page” test: Would they be comfortable seeing

their decision in a newspaper headline? Reactions may differ; try discussing the scenarios at the end of

this document to see the range of opinions each situation generates.

What does it take to reduce risk to a tolerable level? This may be a matter of simply disclosing potential

conflicts to the community board on an annual basis, for example, or noting them in meeting minutes as

they occur. In other cases, an agency official on the board might have to recuse herself from decision

making in a matter in which she might stand to benefit personally and might have undue influence on the

decision. Or the board member involved in the potential conflict may be asked to disclose the conflict to

the rest of the board and answer their questions or produce appropriate documentation. In some cases, a

business relationship cannot be allowed at all because the risk is very serious and there is no way to

minimize it. Which option is most appropriate? Your community board will have to consider various

scenarios when writing its policy. For many people, when they spot a conflict of interest, recusal or

severing the relationship may be their first instinct. But neither course of action may be possible or even

best in certain circumstances. For example, there may be only one potential vendor that has the skills

necessary to respond to an RFQ in a community, and a representative of that vendor may have a

leadership position on the Evidence2Success community board. Keep in mind the realities of your

particular community when you draft your conflict of interest policy.

Regardless of your community board’s COI policy, potential conflicts of interest need to be disclosed,

examined and revisited at regular intervals by the board. The board’s decisions need to be documented

in the meeting minutes. The decisions themselves may differ, however. Two community boards in

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different communities may resolve similar conflicts of interest differently, depending on their answers to

the four-step process described above.

Setting Your Board’s Policy

You probably see how unrealistic it is to set a policy of zero tolerance for any conflict of interest. On the

other hand, you probably realize how wide the potential for abuse can be in certain situations. Every

community has its own circumstances. Public systems and service provider agencies can be deeply

intertwined. It can easily happen that one family may have members in several organizations working

together on Evidence2Success. Or you may find that a potential conflict-of-interest situation has been in

place so long that no one seems to question it. Despite the length of that relationship, it should receive

some scrutiny. Consider local agencies and relationships as you set your policy.

As you draft your policy, you might find it useful to organize your policy statement around the steps in

resolving a conflict. How would you define a conflict? Which conflicts do you envision? What is the range

of risks you imagine, in order of severity?

How many ways can you think of to reduce the risk of a particular conflict? Matching “remedies” to risks

will show that your community board enforces its policy consistently. On the other hand, you may want to

preserve some flexibility to take into account the severity of the risk.

Check with the public systems participating in Evidence2Success. Their own policies should be taken

into account as you draft your policy. For example, you may be able to draft a policy that is more

restrictive than the agencies’ policies, but remember that a public official probably has a greater degree

of accountability to his agency than to the community board.

One Specific Example

One potential problem is a situation where staff from an agency that is responding to the RFQ may be

involved in writing the RFQ and evaluating the responses. In general, this situation seems to present a

serious ethical issue. In some communities, however, this is how local public systems conduct business.

Suppose, for example, that the convening agency that hosts Evidence2Success has a history of work

with a particular segment of the community’s youth population. If the community board decides to

implement a particular program for that segment of the population, it would be foolish to exclude the

agency’s experience and expertise from consideration simply because the agency is represented on the

community board. It would, however, be entirely appropriate for that agency’s representatives to recuse

themselves from reading proposals for implementing the program in question.

A Sample Policy Response

The community board in this community drafted a policy similar to the following. Notice the exceptions.

Would you consider this a satisfactory response to the potential conflict?

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For Discussion: One Community’s Policy Response

If an agency that provides services to local public systems (“service provider”) is represented

on the community board and wishes to respond to a request for quotations (RFQ) issued by

the community board, the situation should be considered a potential conflict of interest by all

parties concerned. The service provider’s representatives must disclose the potential conflict

of interest and recuse themselves from any consideration of the proposals, as well as (if

possible) from the drafting of the RFQ. Potential conflicts of interest must be documented in

the records of the community board’s proceedings.

Exceptions

No conflict of interest exists if the service provider is the convening organization for the local

Evidence2Success effort and is responding to an RFQ for a service category in which the

service provider is already an experienced provider.

No conflict of interest exists if the convening organization for the local Evidence2Success

effort is performing functions that support the quality implementation of tested, effective

programs, such as coordinating program data collection to ensure fidelity of implementation,

and is receiving compensation for performing those functions.

In all exceptions, the service provider’s representatives must recuse themselves from any

consideration of the proposals.

Timing and Consistency: Create Your Policy Early Before Conflicts Arise and

Apply It as a Matter of Regular Practice

It is important for the community board to consider potential scenarios and formulate its policy early, well

before such situations arise. Once the policy is set, the community board needs to disseminate the policy

to its members, workgroups and all participating agencies and establish practices so that the policy is

applied regularly and consistently. The policy needs to be readily available and consistently used.

Benchmark 2.1.9 calls for the COI to be created by the end of Phase 2:

Develop board procedures including documenting and handling conflicts of interest.

Conclusion

Every Evidence2Success community needs a well-thought-out conflict-of-interest policy, created early in

the life of the initiative. The policy should be disseminated to everyone involved in the effort and should

be readily available for ease of reference. Consistent and transparent application of the policy will help

bring all stakeholders together to support the Evidence2Success initiative and its work on behalf of the

community’s children and families.

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For Consideration and Additional Discussion

You can find many conflict-of-interest policies on the Internet. It might be helpful to read one or two in

their entirety to see how their parts fit together. You can also find some excellent resources on drafting a

community nonprofit conflict-of-interest policy online, including the following:

National Council of Nonprofits Resources on Conflicts of Interest

https://www.councilofnonprofits.org/tools-resources/conflict-of-interest

Resources for Developing a Conflict-of-Interest Policy

https://www.nonprofitrisk.org/advice/samples/ConflictPolicy.doc

Conflict of Interest Policies (Resources for Nonprofits)

http://www.idealist.org/info/Nonprofits/Gov5

Consider the hypothetical scenarios below with a partner or in a larger group. These scenarios highlight

potential issues that you should consider when drafting your policy. They don’t always arise in an

Evidence2Success context. Do you agree with the policy provisions? Why or why not? What changes

would you suggest?

Hypothetical Scenario 1

Wurlington Family Services (WFS) is the lead agency for Evidence2Success in the city of Wurlington. WFS leases

its office equipment from Blue Sky Office Supply Inc. The assistant director of WFS, who is part of the local

Evidence2Success community board, owns stock in Blue Sky. During the holiday season each year, Blue Sky drops

off a large poinsettia plan at the main office of WFS. It also drops off a large fruit basket addressed to the director

and staff. Every year, the director donates the basket to a group home run by a service provider agency.

Section 4 of WFS’s Conflict-of-Interest Policy states that conflicts of interest might arise through:

1. Owning stock …in any third party dealing with WFS.

….

5. Receipt of any gift is disapproved except gifts of a value less than $50, which could not be refused without

discourtesy. No personal gift of money should ever be accepted.

On review, the community board decided that the poinsettia posed no conflict of interest because it was being sent

to the office as a whole. The director agreed not to accept the fruit basket again.

Would you reach a different decision if these situations arose in your community? Would you suggest any changes

in this policy?

Example 2

A nonprofit service corporation’s conflict-of-interest policy distinguishes between actual and apparent conflicts of

interest, gives examples and provides instructions for reporting a conflict. The policy ends by saying “If a conflict

does exist, the individual must be isolated from it.”

Would you suggest any changes in this policy?

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Hypothetical Scenario 3

R&F Consumer Products Corporation states: “It is the duty of employees to avoid business or financial dealings or

relationships that conflict with corporate interests or compromise an employee’s loyalty to the corporation.” Next, the

corporation’s conflict-of-interest policy lists situations that may present, or appear to present, a conflict of interest.

The policy then states: “All employees must disclose such situations to management. Any such activity that appears

to present a possible conflict must be stopped or terminated. Exceptions are permitted only after a management

determination that the conflict is not harmful.”

Do you think the disclosure requirement makes sense? Would you want to make any changes to this policy?

Hypothetical Scenario 4

A large nonprofit foundation’s conflict-of-interest policy states that it applies only to:

Members of the board of directors

Officers (e.g., the chief executive officer, chief operating officer)

Key employees (directors and managing directors)

Do you foresee any problems from restricting the conflict-of-interest policy to this list? Would you make any changes

to this part of the policy?