# BAU FARM FOUNDATION ## Conflict-of-Interest Policy *Adopted by the Board of Directors on __________, 20__. Modeled on Appendix A of IRS Form 1023 Instructions and tailored to North Carolina nonprofit law. Supplements Article VII of the Bylaws; in the event of conflict, the Bylaws control.* --- ### Article I — Purpose The purpose of this Conflict-of-Interest Policy (the "Policy") is to protect the interests of **BAU Farm Foundation** (the "Foundation") when it is contemplating entering into a transaction or arrangement that might benefit the private interest of an officer or director of the Foundation, or might result in a possible excess-benefit transaction under Section 4958 of the Internal Revenue Code (the "Code") or an act of self-dealing under Section 4941. This Policy is intended to supplement, not replace, any applicable state and federal laws governing conflicts of interest for nonprofit and charitable organizations. --- ### Article II — Definitions **Interested Person.** Any director, principal officer, or member of a committee with governing-board-delegated powers, who has a direct or indirect Financial Interest, as defined below. **Financial Interest.** A person has a Financial Interest if the person has, directly or indirectly, through business, investment, or family: 1. an ownership or investment interest in any entity with which the Foundation has or is contemplating a transaction or arrangement; 2. a compensation arrangement with the Foundation or with any entity or individual with which the Foundation has or is contemplating a transaction or arrangement; or 3. a potential ownership or investment interest in, or compensation arrangement with, any entity or individual with which the Foundation is contemplating a transaction or arrangement. Compensation includes direct and indirect remuneration as well as gifts or favors that are not insubstantial. **Family.** Spouse or domestic partner, ancestors, children, grandchildren, great-grandchildren, siblings (whole or half), and the spouses of any of them. A Financial Interest is not necessarily a conflict of interest. Under Article III, Section 2, a person who has a Financial Interest may have a conflict of interest only if the appropriate governing board or committee decides that a conflict of interest exists. --- ### Article III — Procedures **Section 1. Duty to Disclose.** In connection with any actual or possible conflict of interest, an Interested Person must disclose the existence of the Financial Interest and be given the opportunity to disclose all material facts to the directors and members of committees with governing-board-delegated powers considering the proposed transaction or arrangement. **Section 2. Determining Whether a Conflict Exists.** After disclosure of the Financial Interest and all material facts, and after any discussion with the Interested Person, the Interested Person shall leave the governing-board or committee meeting while the determination of a conflict of interest is discussed and voted upon. The remaining board or committee members shall decide if a conflict of interest exists. **Section 2A. Recusal Procedure.** When a conflict is determined to exist, the following recusal procedure applies: a. **Announcement.** The Chair (or presiding officer) shall announce the recusal at the meeting and instruct the Secretary to record the recusal in the minutes, including the name of the Interested Person, the nature of the Financial Interest, and the matter from which the person is recused. b. **Physical or Virtual Departure.** The Interested Person shall leave the room (or, for remote meetings, disconnect from the audio/video channel and any related chat) during the discussion and vote. Merely abstaining while remaining present is not sufficient. c. **Access to Materials.** The Interested Person shall not receive Board or committee materials relating to the recused matter, or shall return or delete such materials if already received. Executive-session records concerning the matter shall be withheld from the Interested Person. d. **No Advocacy Outside the Meeting.** The Interested Person shall not attempt to influence, directly or indirectly, other directors, officers, or staff regarding the recused matter outside the disclosure permitted in Section 3(a). e. **Quorum.** The recused person is not counted for quorum purposes on the recused matter, but remains counted for quorum on other matters at the same meeting. f. **Return to Meeting.** After the vote is recorded, the Chair shall inform the Interested Person of the outcome and invite the person to rejoin the meeting for subsequent business. **Section 3. Procedures for Addressing the Conflict.** a. An Interested Person may make a presentation at the governing-board or committee meeting, but after the presentation, the Interested Person shall leave the meeting during the discussion of, and the vote on, the transaction or arrangement involving the possible conflict of interest. b. The Chair (or Chair's designee) shall, if appropriate, appoint a disinterested person or committee to investigate alternatives to the proposed transaction or arrangement. c. After exercising due diligence, the governing board or committee shall determine whether the Foundation can obtain a more advantageous transaction or arrangement, with reasonable efforts, from a person or entity that would not give rise to a conflict of interest. d. If a more advantageous transaction or arrangement is not reasonably possible under circumstances not producing a conflict of interest, the governing board or committee shall determine by a majority vote of the disinterested directors whether the transaction or arrangement is in the Foundation's best interest, for its own benefit, and whether it is fair and reasonable. In conformity with the above determination, it shall make its decision as to whether to enter into the transaction or arrangement. **Section 4. Violations.** a. If the governing board or committee has reasonable cause to believe an Interested Person has failed to disclose actual or possible conflicts of interest, it shall inform the Interested Person of the basis for such belief and afford the Interested Person an opportunity to explain the alleged failure to disclose. b. If, after hearing the response and after making further investigation as warranted by the circumstances, the governing board or committee determines that the Interested Person has in fact failed to disclose an actual or possible conflict of interest, it shall take appropriate disciplinary and corrective action, up to and including removal from office or termination of employment. --- ### Article IV — Records of Proceedings The minutes of the governing board and all committees with board-delegated powers shall contain: a. the names of the persons who disclosed or otherwise were found to have a Financial Interest in connection with an actual or possible conflict of interest, the nature of the Financial Interest, any action taken to determine whether a conflict of interest was present, and the governing board's or committee's decision as to whether a conflict of interest in fact existed. b. the names of the persons who were present for discussions and votes relating to the transaction or arrangement, the content of the discussion, including any alternatives to the proposed transaction or arrangement, and a record of any votes taken in connection with the proceedings. --- ### Article V — Compensation a. A voting member of the governing board who receives compensation, directly or indirectly, from the Foundation for services is precluded from voting on matters pertaining to that member's compensation. b. A voting member of any committee whose jurisdiction includes compensation matters and who receives compensation, directly or indirectly, from the Foundation for services is precluded from voting on matters pertaining to that member's compensation. c. No voting member of the governing board or any committee whose jurisdiction includes compensation matters and who receives compensation, directly or indirectly, from the Foundation, either individually or collectively, is prohibited from providing information to any committee regarding compensation. d. When approving compensation of the Executive Director or any other "disqualified person" as defined in Section 4958 of the Code, the Board shall follow the rebuttable-presumption procedures of Treasury Regulation § 53.4958-6, including: (i) approval by disinterested directors, (ii) use of appropriate comparability data, and (iii) contemporaneous documentation of the basis for the determination. --- ### Article VI — Annual Statements and Ongoing Disclosure **Section 1. Annual Statement.** Each director, principal officer, key employee, and member of a committee with governing-board-delegated powers shall annually sign a statement that affirms such person: a. has received a copy of the Conflict-of-Interest Policy; b. has read and understands the Policy; c. has agreed to comply with the Policy; and d. understands the Foundation is charitable and, in order to maintain its federal tax exemption, it must engage primarily in activities that accomplish one or more of its tax-exempt purposes. **Section 2. Disclosure Form.** The annual statement shall be made on the Annual Conflict-of-Interest Disclosure Form (docs/legal/bau-farm-foundation-conflict-disclosure-form.md) or a successor form adopted by the Board. The form shall be circulated no later than the first regular Board meeting of each fiscal year and returned within thirty (30) days. **Section 3. Ongoing Disclosure.** In addition to the annual statement, each covered person shall disclose in writing to the Chair or the Governance and Nominating Committee, promptly and no later than the next Board or committee meeting, any Financial Interest that arises or changes during the year and any actual or potential conflict of interest that arises with respect to a specific matter before the Foundation. **Section 4. Collection and Retention.** The Governance and Nominating Committee (or the Secretary at the Committee's direction) shall collect, review, and retain annual statements and interim disclosures for at least seven (7) years, report any material disclosures to the full Board, and maintain a summary log of active Financial Interests available to the Chair, Executive Director, and Compliance Officer. --- ### Article VII — Periodic Reviews To ensure the Foundation operates in a manner consistent with charitable purposes and does not engage in activities that could jeopardize its tax-exempt status, periodic reviews shall be conducted at least every three (3) years. The periodic reviews shall, at a minimum, include the following subjects: a. Whether compensation arrangements and benefits are reasonable, based on competent survey information, and the result of arm's-length bargaining. b. Whether partnerships, joint ventures, and arrangements with management organizations conform to the Foundation's written policies, are properly recorded, reflect reasonable investment or payments for goods and services, further charitable purposes, and do not result in inurement, impermissible private benefit, or in an excess-benefit transaction. --- ### Article VIII — Use of Outside Experts When conducting the periodic reviews as provided for in Article VII, the Foundation may, but need not, use outside advisors. If outside experts are used, their use shall not relieve the governing board of its responsibility for ensuring periodic reviews are conducted. --- ### Article IX — Monitoring, Enforcement, and Form 990 Alignment **Section 1. Purpose.** This Article establishes the ongoing monitoring and enforcement practices required to answer "Yes" truthfully to IRS **Form 990, Part VI, Section B, Line 12** ("Governance, Management, and Disclosure — Policies") and its subparts: - **Line 12a** — the Foundation has a written conflict-of-interest policy (this Policy); - **Line 12b** — officers, directors, trustees, and key employees are required to disclose annually interests that could give rise to conflicts (Article VI); and - **Line 12c** — the Foundation regularly and consistently monitors and enforces compliance with the Policy (this Article). **Section 2. Monitoring Responsibilities.** a. **Governance and Nominating Committee.** Owns the annual disclosure cycle, maintains the disclosure log, reviews disclosures for materiality, and reports to the Board at least annually on compliance. b. **Chair.** Confirms recusals are executed correctly at each meeting and that minutes reflect the record required by Article IV. c. **Secretary.** Records disclosures, recusals, discussion, and votes in Board and committee minutes with sufficient detail to support Line 12c. d. **Compliance Officer.** Receives whistleblower reports of alleged Policy violations and coordinates with the Governance and Nominating Committee and outside counsel as needed. **Section 3. Regular and Consistent Monitoring — Minimum Practices.** To satisfy Line 12c, the Foundation shall, at a minimum: a. distribute the Policy and disclosure form to every covered person at onboarding and annually thereafter; b. collect signed annual disclosures within thirty (30) days of distribution and follow up in writing until returned; c. review each Board and committee meeting agenda in advance to flag matters that may implicate a disclosed Financial Interest; d. include a standing "Conflicts of Interest" agenda item at each regular Board meeting for disclosure of new or updated interests; e. document recusals under Article III, Section 2A in the minutes verbatim, including the recused matter, the recused person, and the vote of disinterested directors; f. reconcile actual transactions each year against the disclosure log during the annual audit or independent financial review, and report exceptions to the Finance and Audit Committee; g. deliver an annual compliance report to the full Board summarizing (i) disclosures received, (ii) recusals recorded, (iii) transactions approved after conflict review, and (iv) any Policy violations and corrective actions; and h. update the Policy and this Article as needed following any material change in law, IRS guidance, or Foundation activity. **Section 4. Enforcement.** Policy violations shall be investigated under Article III, Section 4 and the Whistleblower and Fraud-Reporting Policy. Substantiated violations may result in: - written reprimand or censure; - rescission or renegotiation of the tainted transaction; - recovery of any excess benefit under IRC § 4958 or self-dealing correction under IRC § 4941; - removal from Board or committee under Bylaws § 3.7; - termination of employment; and - referral to the IRS, NC Attorney General, or law enforcement as appropriate. **Section 5. Form 990 Disclosures.** The Treasurer and Secretary, working with the Foundation's independent accountants, shall ensure that: a. **Part VI, Section B, Line 12a–c** is answered accurately and consistently with this Article; b. **Part VI, Section B, Line 15** describes the compensation-review process for the Executive Director and other officers/key employees, consistent with Article V and the Executive Compensation Review Procedure; c. **Schedule L** (Transactions with Interested Persons) is completed for any excess-benefit transaction, loan, grant, or business transaction involving an interested person meeting the applicable thresholds; and d. **Schedule O** provides narrative explaining the monitoring practices described in Section 3 above, so that Line 12c can be answered "Yes" with adequate support. **Section 6. Records.** Records supporting the practices in this Article — including annual disclosures, meeting agendas and minutes, recusal records, audit reconciliations, and annual compliance reports — shall be retained under the Document Retention and Destruction Policy for at least seven (7) years (or longer if that Policy specifies) and shall be made available to auditors, funders, and regulators as appropriate. --- ### Article X — Coordination With Other Policies This Policy operates together with the Foundation's Bylaws (Article VII), Executive Compensation Review Procedure, Whistleblower and Fraud-Reporting Policy, Board Member Confidentiality and Non-Disclosure Agreement, and Document Retention and Destruction Policy. In the event of any inconsistency, the Bylaws control, followed by this Policy, followed by the other policies in the order listed. --- ## Acknowledgment I have read the foregoing Conflict-of-Interest Policy and agree to abide by it. ____________________________ Date: __________ Printed name: __________ Position: ☐ Director ☐ Officer ☐ Committee member ☐ Key employee