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Robust Conflict of Interest Policies Promote Better Grantmaking

Robust Conflict of Interest Policies Promote Better Grantmaking

In the decade that has passed since the Enron collapse (yes, it really has been that long!) and the overhaul of the board governance standards we often refer to with the shorthand "Sarbanes-Oxley," it has become not only a best practice but, increasingly, a standard practice for organizations of all types - including publicly-supported 501(c)(3) non-profits and private foundations - to adopt conflict of interest policies. At the heart of every one of these policies is the core concept that board members, staff, volunteers, and their close family members should not personally benefit from the decisions in which they are involved or over which they have some influence.   

Most conflict of interest policies focus on what are described as "business conflicts," which tend to be relatively easy to spot and navigate, as long as all involved openly disclose potential conflicts. Basically, if the foundation is considering a financial transaction and you, your family, or your business could benefit from that transaction, the foundation's conflict of interest policy should have guidelines that either prevent you from voting, remove you from the discussion, or disqualify you (or your family member or business) from consideration. Failing to avoid such conflicts or running amok of the IRS regulations on "self-dealing" can jeopardize the foundation's nonprofit status and have legal ramifications for all involved.

While foundations may choose to limit their conflict of interest policies to deal with business conflicts, the Maine Health Access Foundation (MeHAF) has taken its own conflict of interest policy a step further to include "grantmaking conflicts."  The policy, in essence, prohibits a MeHAF board member from participating in a grantmaking decision if he or she or a family member serves in either a volunteer or paid capacity with the potential grant recipient. A copy of MeHAF's "Conflict of Interest Policy" is available on our website.

Including grantmaking conflicts in the conflict of interest policy is not required of private foundations. In fact, some private foundations exist, in large part, for the purpose of supporting affiliated organizations. However, as a private foundation that has chosen to operate in the public arena, the MeHAF board has determined that even the appearance of a conflict of interest is unacceptable. This not only acknowledges the foundation's origins as a "conversion foundation" (started with funds from the sale of the nonprofit Blue Cross Blue Shield of Maine to Anthem) but also the reality that achieving its mission, "to promote access to quality health care, especially for those who are uninsured and underserved, and improve the health of everyone in Maine," can only be accomplished through collaborative efforts that engage groups,  organizations and individuals from all walks of life and points of view whose overriding commitment is to promote access and improve health in Maine.

MeHAF board members are "selected for service on the basis of their widely recognized professional expertise and experience, and deep personal commitment to promoting access and improving health in Maine," so finding candidates who are free of all conflicts is not only very difficult but perhaps not even desirable. Given Maine's small population, and the fact that many nonprofit organizations rely on the knowledge and experience of a relatively small group of highly qualified individuals in the health care field, it is inevitable that MeHAF's board members will have current or prior affiliations with organizations seeking support from the foundation.

Of course, there is the option of looking for board members who are completely free of any grant-making conflicts, but imagine trying to develop strategies or make grants to help the uninsured gain access to primary care without having a physician or a nurse as part of the conversation. Consider what it would be like to launch an initiative to reduce barriers to health care for the homeless, for victims of domestic violence, or for the frail elderly without the counsel of someone who has worked with those populations. Or think about what kind of health care policy might be shaped by a board made up of individuals who have never advocated for the rights of the uninsured or underserved. It is because they have been volunteers; it is because they have worked as professionals in the field; and it is because they care so deeply about our priority populations--the uninsured and underserved--that we want them on the MeHAF board.

By choosing to be a private foundation that acts like a public one, MeHAF demonstrates a level of transparency that is unheard of in much of the foundation community. While grantmaking decisions are discussed in executive session, almost all other aspects of the foundation's charitable work are conducted in in meetings that are open to the public. Funding opportunities under consideration, projects underway, funding decisions, and foundation finances are all readily available to the public on the MeHAF web site, in foundation-generated blog postings, or simply for the asking. This same level of transparency is brought to the board's approach to its conflict of interest policy. Board meeting minutes always include what conflicts were identified, who participated in the conversations and votes, and who was recused from the meeting and waited outside during the deliberations and the voting.

MeHAF's broad conflict of interest policy can be cumbersome - disqualifying some trustees from service on specific committees; requiring extensive disclosure and tracking of conflicts; and adding time to the grantmaking process.  But we know that our more deliberate and transparent process ensures that every grantmaking decision and financial transaction is made solely because it supports our charitable mission and is in the best interest of the people of Maine.

Jeff Wahlstrom is the Chair of MeHAF's Board of Trustees.

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