Conflict of Interest Policy
Service to School (the “Company”) exclusively operates to facilitate its charitable mission and advance veteran access to higher education. The Company’s Board of Directors (the “Board”) adheres to the highest ethical standards and supervises the same of its employees, ambassadors and volunteers to ensure the Company’s resources are exclusively used to efficiently to meet its charitable mission. The Board reserves the right to implement measures to assure that decisions are not influenced by self-interest. This policy is intended to provide guidance on how to deal appropriately with situations that involve, or may appear to involve, conflicts of interest, and to comply with federal and state laws concerning conflicts of interest.
While it is Company policy that conflicts of interest and appearances of conflicts of interest be kept to a minimum, the Company has always included, and benefited from including, directors, advisors, and staff with close associations with individuals and entities that are appropriate sources of donations and appropriate recipients of our partners to the Company’s charitable mission. For example, the Company maintains and intends to maintain strong relationships with several universities in carrying out its charitable mission, and may further partner with additional veteran benefit organizations. The Company will not discriminate against worthy donors, worthy recipients, or worthy partners simply because the Board or the Company’s other personnel have pre-existing relationships with those donors or recipients or later develop such relationships. This Policy describes, among other things, how decisions involving these and similar situations should be dealt with to ensure the integrity of the process and the Company’s charitable mission. Its basic purpose is to avoid both the reality and the perception that the Board or Company personnel and service providers have used their positions to derive inappropriate financial, personal or institutional benefits, and it should be interpreted and applied to achieve this purpose.
In order to assure impartial decision making, it is the policy of the Company that any conflicts of interest, or apparent or potential conflicts of interest, be fully disclosed before a decision is made on the matter involved, and that no Board member, officer, employee, ambassador, or volunteer participate (other than by providing information) in any decision in which he or she has a conflict of interest. The Board will not approve, and the Company will not participate in, any self-dealing transaction prohibited by law.
It is the continuing responsibility of all Board members, officers, employees, ambassadors, and volunteers to review their outside business interests, philanthropic interests, personal interests, and family and other close relationships for actual, apparent, or potential conflicts of interest with respect to the Company, and to promptly disclose the nature of the interest or relationship.
Generally, a conflict of interest with respect to a proposed Company transaction or grant exists if a Board member, officer, employee, ambassador, or volunteer of the Company: (a) is in a position to make or influence the Company’s decisions about whether and how to proceed with a proposed transaction or course of action, and (b) has an affiliation, as described below, with any other party to a business transaction or course of action. An apparent conflict of interest is one that an objective party might reasonably believe would cause the Board member’s, officer’s, employee’s, ambassador’s, or volunteer’s decision to be tainted by self-interest.
For purposes of this policy, an affiliation is the close involvement with a vendor, service provider, customer, or grantee on the part of a Board member, officer, employee, ambassador, volunteer of the Company, or such individual’s spouse, domestic partner, parent, other ancestor, lineal descendant through great-grandchildren, or spouse or partner of such descendants.
Affiliation includes, but is not limited to, serving as a Board member, officer, employee, consultant, or equity holder to a current or potential party that has a business relationship to the Company. Board members, officers, employees, ambassadors, and volunteers of the Company shall communicate fully with the Company regarding such affiliations and any other relationship or commitment that could affect, or be seen to affect, the impartial fulfillment of their roles in the affairs of the Company. Doubts about whether a relationship warrants disclosure under this policy should be resolved in favor of disclosure.
Generally, in all situations involving a potential affiliation described above, the Board member, officer, employee, ambassador, or volunteer should abstain from voting or otherwise participating in the decision other than by providing information requested by the disinterested decision makers. That abstention should be formally noted in the minutes in the case of Board minutes for those Board decisions that may involve the affiliation, or other appropriate written record in other cases.
The Executive Director or Legal Counsel as the case may be, shall investigate the facts; seek advice from outside counsel on legal issues as necessary; and report to the Board (less any potentially interested Board member) of the facts of the potential affiliation. The Board shall deliberate and determine whether to proceed with the proposed transaction, and potentially interested Board members who abstain from such deliberations will nonetheless be counted as present for a quorum.
If there is a conflict of interest or apparent conflict of interest in connection with a transaction that would not normally go to the Board (such as a contract within the discretion of the Executive Director or other officer), the Executive Director may determine under advice of the Company’s Legal Counsel that the transaction involves no economic interest of any affiliated party. In any such determination, the Legal Counsel shall nonetheless determine federal or state law treats the transaction as self-dealing even in the absence of any economic interest. If Legal Counsel concludes that, on the facts provided, there is no self-dealing, the matter may be referred to the Board for review and, if appropriate, approval.
The Company will generally avoid any transaction that results in direct or indirect material economic benefit to any affiliated person. If the Board believes that such a transaction is in the best interests of the Company’s charitable mission, and if the transaction is not prohibited by federal or state law, the Board may, with the advice of counsel, consider the transaction in accordance with the relevant procedures set forth in the California Non-Profit Corporation Law.
The Internal Revenue Code imposes a penalty on self-dealing between the Company and disqualified persons (see Appendix A). The Company will not engage in such self-dealing. Generally speaking, sales of property, goods, or services; exchanges and loans with a disqualified person (such as a Board member or officer or a member of their families); payment of compensation to a disqualified person; and use of Company assets by or for the benefit of a disqualified person constitute self-dealing and, unless an exception applies, are prohibited.
Definition of Disqualified Persons. For purposes of this policy, the Company elects to adopt, and adhere to fullest extent possible, those self-dealing rules applicable to private foundations under section 509 and 4941 of the Internal Revenue Code, under such sections prohibited self-dealing transactions with disqualified persons may include:
- Board members and officers as well as other “managers” who have decision authority over a specific transaction;
- Substantial contributors to the Company;
- Family members of the foregoing (i.e., spouses, ancestors, lineal descendants through great-grandchildren, and spouses of such descendants); and
- Any entity (other than another section 501(c)(3) organization) in which disqualified persons own a 35 percent or greater ownership interest.
Transactions Prohibited Under the Self-Dealing Rules.
- Selling, exchanging, or leasing of property between the Company and a disqualified person is an act of self-dealing, even if the Company pays demonstrably less than the fair market value of the property it receives. A contribution of property subject to a mortgage is treated as a sale or exchange, and hence, constitutes self-dealing.
- Lending of money or other extension of credit by the Company to a disqualified person is an act of self-dealing. In addition, a disqualified person may not lend to the Company unless the loan is interest free and the proceeds are used exclusively for charitable purposes. Where a disqualified person has made an interest-free loan to the Company, the Company may not repay the loan with property other than cash.
- Furnishing of goods, services, or facilities by a disqualified person to the Company is an act of self-dealing unless these items are offered free of charge. Conversely, the Company may provide goods, services, or facilities to a disqualified person only if the disqualified person is treated no differently from other members of the public to whom the foundation also makes these items available.
- Payment of compensation to a disqualified person and reimbursement of related expenses are acts of self-dealing unless the services performed by such person are personal services that are reasonable and necessary to carrying out the purposes of the Company’s charitable mission and the compensation and reimbursements are reasonable in amount.