Conflicts of Interest: When a Board Member’s Cousin Gets the Catering Contract

Every grassroots NPO eventually runs into this moment: the board is choosing a supplier, a venue, or a service provider, and it turns out one of the board members happens to be related to — or business partners with — one of the people bidding. Nobody did anything wrong yet. But if the board doesn’t handle this properly, they’re about to.

What actually counts as a conflict of interest?

A conflict of interest arises whenever a board member’s personal interests — financial or otherwise — could reasonably influence, or appear to influence, a decision they’re involved in making on behalf of the organisation. It doesn’t require bad intent. The cousin’s catering business might genuinely be the best and cheapest option in town. The conflict exists regardless, because from the outside, nobody can tell the difference between “we chose the best option” and “we looked after family” unless the process was transparent.

Under the Companies Act, directors have a formal duty to disclose any personal financial interest — theirs or a related person’s — in a matter before the board, and to step back from the decision once they have. This applies to NPC boards just as much as any other company; the fact that nobody’s getting rich off an NPO doesn’t remove the duty.

The three-step process: disclose, record, recuse

1. Disclose. As soon as a board member becomes aware of a personal interest in a matter, they need to say so — out loud, to the board, before the discussion gets underway. Waiting until after the decision is made is not disclosure, it’s damage control.
2. Record. The disclosure goes in the minutes: who declared what interest, and in relation to which item. This is the paper trail that protects both the board member and the organisation later.
3. Recuse. The conflicted board member then leaves the discussion and doesn’t vote on the matter. They’re still counted for quorum purposes, but they don’t get a say in the outcome.

Skip any of these three steps and you risk more than an awkward moment — a decision made without proper disclosure can be challenged, and in some cases even declared invalid unless it’s later ratified by the other members.

A simple tool: the conflicts register

Most well-run boards keep a standing conflicts register — a running document where board members declare, at the start of each year (and whenever something changes), any relationships, businesses, or financial interests that could plausibly come up. This isn’t about assuming the worst of anyone; it’s about making disclosure a routine habit rather than an awkward one-off confession. A board member who’s already declared “my cousin runs a catering business” at the start of the year has a much easier time recusing themselves when the moment actually arrives.

It’s not just about money

Conflicts aren’t only financial. A board member sitting on the selection panel for a beneficiary programme their own family member is applying to is a conflict. A board member who also chairs a rival organisation competing for the same grant funding is a conflict. If in doubt, the test is simple: would a reasonable outsider, looking at this decision, wonder whether it was made fairly? If yes, declare it.

Why grassroots NPOs are especially exposed here

Small, close-knit communities are exactly where conflicts of interest are most likely to occur — and also where they’re most likely to go undeclared, simply because everyone already knows everyone. That familiarity is often the organisation’s greatest strength. It’s also precisely why a formal process matters more here, not less: informal trust between board members doesn’t reassure a funder or an auditor who’s never met any of them.

The bottom line

Conflicts of interest aren’t a scandal waiting to happen — they’re a normal, everyday feature of small organisations, especially in tight-knit communities. What matters is whether your board has a habit of naming them, recording them, and stepping back from the decision when they arise. Handled properly, a conflict of interest is a Tuesday. Handled badly, it’s the story that ends up in front of a funder, a journalist, or a court.