Conflicts of Interest Policies Under N.Y. N-PCL § 715-A and New Jersey Best Practices
Conflicts of interest are inevitable in nonprofit governance — especially when directors, officers, or employees wear multiple hats in the community.
While some overlap is unavoidable, the law requires clear procedures to identify, disclose, and manage conflicts so that personal interests never outweigh an organization’s charitable mission.
At Good Pine P.C., we help nonprofits in New York and New Jersey adopt practical, compliant conflict-of-interest policies that protect both the organization and its board members.
1. Why Conflicts of Interest Policies Matter
A conflict of interest arises when someone in a position of authority within a nonprofit — such as a director, trustee, officer, or key employee — could personally benefit from a transaction or decision made by the organization.
Examples include:
The nonprofit hiring a company owned by a board member.
A director approving a grant to an organization where their spouse works.
An officer influencing a decision that affects their own financial interest.
Even if no wrongdoing occurs, the appearance of conflict can erode public trust, jeopardize donations, and expose the organization to regulatory penalties.
That’s why both New York and New Jersey law require nonprofits to adopt written conflict-of-interest policies and document compliance through board meeting minutes.
2. New York Requirements Under N.Y. N-PCL § 715-A
New York’s Not-for-Profit Corporation Law § 715-A mandates that every nonprofit corporation adopt a formal Conflict of Interest Policy approved by the board.
Legal Requirements
Under § 715-A, the policy must:
Define conflicts of interest, including transactions or arrangements where an individual might have a direct or indirect financial interest.
Require disclosure of any actual or potential conflict to the board or an authorized committee.
Prohibit participation in discussions or votes on matters where the conflict exists.
Require documentation in board minutes of:
The disclosure,
The board’s discussion and deliberation,
The final decision and its rationale.
Require annual written disclosures by all directors, officers, and key employees of any potential conflicts.
Be distributed to all covered individuals, who must acknowledge receipt.
Key Distinctions for New York
Applies to all nonprofit corporations, regardless of size.
Enforcement falls under the New York Attorney General’s Charities Bureau, which can request copies during audits or investigations.
Public charities registered in New York must also report compliance on the CHAR500 annual filing.
Failure to comply can trigger state enforcement actions, including penalties, removal of directors, or loss of charitable registration.
3. New Jersey’s Approach and Best Practices
Unlike New York, New Jersey’s Nonprofit Corporation Act (Title 15A) does not expressly mandate a written conflict-of-interest policy for all nonprofits.
However, New Jersey regulators and courts expect organizations to follow “best practices” consistent with IRS standards and good governance principles.
Recommended by the New Jersey Attorney General and Division of Consumer Affairs
New Jersey’s Charitable Registration and Investigation Section encourages nonprofits to:
Adopt a written conflict-of-interest policy approved by the board.
Ensure annual disclosure of financial interests from board members and officers.
Document recusals and board deliberations in meeting minutes.
Provide orientation and training on ethics and fiduciary duties.
Additionally, IRS Form 990 Part VI asks whether the organization has a written conflict-of-interest policy and follows it — meaning compliance is effectively required for transparency and accountability.
4. Elements of a Strong Conflict-of-Interest Policy
A compliant policy in either state should include the following:
Purpose Statement
To protect the organization’s integrity and ensure decisions serve its charitable purpose.
Definitions
Define what constitutes a “financial interest,” “conflict of interest,” and “related party.”
Disclosure Procedures
Require board members and officers to disclose potential conflicts in writing, annually and as they arise.
Recusal Process
Individuals with a conflict must leave the room during discussion and abstain from voting.
Board Review
The disinterested directors must determine whether the transaction is fair and in the organization’s best interest.
Recordkeeping
The meeting minutes must reflect all disclosures, recusals, and decisions.
Annual Acknowledgment
Every covered person signs an annual statement confirming they have read and understand the policy.
5. Related Party Transactions vs. Conflicts of Interest
It’s important to note that under New York law, “related party transactions” under N-PCL § 715 are a subset of conflicts of interest and are subject to additional scrutiny.
A “related party” includes:
Directors, officers, and key employees;
Their relatives; or
Any entity in which they have a 35% or greater ownership or beneficial interest.
Boards must determine that any related-party transaction is fair, reasonable, and in the organization’s best interest, and must document their reasoning.
Violations can lead to enforcement by the Attorney General’s Charities Bureau.
6. Practical Steps for Compliance
To implement a sound compliance framework:
Adopt and circulate a formal Conflict-of-Interest Policy that meets N.Y. N-PCL § 715-A standards.
Train directors and officers annually on identifying and disclosing potential conflicts.
Collect annual disclosure statements and store them securely.
Include conflict review procedures on every board meeting agenda.
Record recusals and approvals clearly in the minutes.
Update bylaws and policies as laws or IRS requirements change.
For New Jersey nonprofits, adopting a written policy aligned with these same principles demonstrates good faith and mitigates risk.
7. Conclusion
Nonprofit leaders often act with good intentions — but even perceived conflicts can damage credibility.
Adopting and enforcing a strong conflict-of-interest policy protects both your organization’s reputation and its tax-exempt status.
Whether your nonprofit operates in New York or New Jersey, Good Pine P.C. can help ensure your policy complies with state law, IRS expectations, and practical governance standards.
Legal Disclaimer
This article is provided by Good Pine P.C. for general informational purposes only and does not constitute legal advice. Reading this article does not create an attorney–client relationship. Laws and regulations may change, and their application depends on specific facts and circumstances. You should consult a qualified attorney before taking any action based on this information.
