Ethics & Accountability

Grantmaking foundations have a strong history of being created with honorable motives and operated with unquestionably high standards. Find questions and answers as well as sample policies to promote best practices and encourage the highest level of ethical governance for both public and private foundations.

In-Depth knowledge on Ethics & Accountability

With Congress and the media focusing on corporate governance and foundation administration, it is a good time to make sure that all grantmakers have a strong conflict of interest policy in place. Both private foundations and public charities (such as community foundations) should have clear guidelines on financial or other interests that must be disclosed and transactions that must be scrutinized or avoided. The policy should cover both board members and foundation staff. A robust conflicts policy can not only help a grantmaker stay on the right side of the law but can also keep the organization from engaging in behavior that gives even the appearance of conflict.

Form 1023 is in the vanguard of IRS forms that are designed to educate tax-exempt organizations and help halt abusive transactions. In addition, the form and instructions contain questions and information about conflicts of interest that all grantmakers should consider.

This article focuses on conflicts of interest around foundation investments. May foundation board members (or other closely affiliated individuals or businesses) manage foundation investments? May they be paid for this service? What factors should foundation managers consider before they select an investment manager who has a close relationship with the foundation? When is it a bad idea? What special procedures should be followed when a board member or other close affiliate is also an investment manager?

What do you do when a grantee—or potential grantee—asks someone on your board or staff to sit on their board? Does such a request constitute a conflict of interest? Are there times when such a situation can actually benefit one or both of the organizations involved?