Wise Giving Wednesday: Mission Over Personal Gain in Charity Governance

When a charity handles conflicts of interest and related-party transactions well, it strengthens public trust and helps donors give with greater confidence.

Why Charity Mission Must Come Before Personal Gain

Charities exist to serve the public good. Donors, volunteers, and beneficiaries place their trust in nonprofit organizations with the expectation that resources will be used to advance the charity’s mission, and not to benefit individuals connected to the organization.

To qualify as a 501(c)(3) charity under the Internal Revenue Code, organizations must be organized and operated exclusively for exempt purposes and not for private benefit or profit.

Consistent with this principle, board members have a duty of loyalty, requiring them to act in the best interests of the organization rather than their own financial interests.

What Related-Party Transactions Mean for Charities

Related-party transactions occur when a charity conducts business with individuals or entities connected to its board members or staff.

Examples include purchasing goods or services from businesses affiliated with board members, making grants to organizations where board members serve, or extending loans to board members or staff.

Conflicts of Interest Matter to Donors and Public Trust

For this reason, related-party transactions and conflicts of interest are important governance issues that charities must manage carefully to maintain public trust and meet the BBB Standards for Charity Accountability.

When a Related-Party Transaction May Be Acceptable

Not every related-party transaction creates a conflict of interest.

For example, a charity might rent a facility owned by a board member if the rate and location are demonstrably better than other available options. In that case, the arrangement may serve the charity’s interests rather than provide improper benefit to the related party.

By contrast, a charity with substantial contracts awarded to a company partly owned by its Chief Executive Officer would understandably raise concerns among donors and stakeholders.

How to Determine Whether a Material Conflict Exists

Each related-party transaction is unique and requires careful review of the specific circumstances to determine whether a material conflict exists.

Some of the factors considered under BBB Charity Standard 5 (Conflict of Interest) include:

• Whether the charity has and follows a conflict-of-interest policy: A written conflict-of-interest policy is an essential first step. However, having a policy alone does not resolve potential conflicts unless it is strong, clearly implemented, and consistently followed.
• The size of the transaction relative to the charity’s budget and comparable expenses: Large transactions with board (or staff) related businesses can raise concerns and warrant closer review.
• Whether the transaction is one-time or ongoing: Multiple smaller transactions may collectively represent significant related-party activity.
• Recusal of the interested party: Even when a related-party transaction may benefit the charity’s mission, it is good governance practice for the individual involved to disclose the relationship and recuse themselves from discussion and voting.
• Whether competitive bids were obtained: When charities procure goods or services, they should consider multiple options to evaluate price, quality, and overall value before determining whether the related party’s offer is the best choice.
• Other arm’s-length procedures used by the charity: These may include independent outside evaluations, requiring interested parties to leave the room during deliberations, or documenting the board’s decision-making process in detail.

Other Governance Safeguards That Help Protect a Charity’s Mission

Another important governance threshold is set by BBB Charity Standard 4, which requires that no more than one or 10% of board members (whichever is greater) be directly or indirectly compensated.

It also requires that any compensated members not serve as Board Chair or Treasurer.

Together, Standards 4 and 5 help ensure that nonprofit boards remain independent and free from self-dealing.

Support Trusted Charities with Confidence

Strong governance practices help ensure that leadership decisions prioritize the organization’s charitable mission rather than personal financial interests, thereby maintaining the trust donors place in charitable organizations.

Before you give, take a moment to see whether a charity meets all BBB Standards for Charity Accountability at Give.org.

• Search for charities by name on Give.org →
• Explore trusted charities by cause with AskGive, our AI-powered advisor →

A quick check can help you make informed giving decisions and support organizations committed to transparency, accountability, and mission-focused leadership.

Recent Reports

We are always working with charities to publish or update reports for donors. Visit Give.org to check out any charity before giving. Our recently evaluated charities include:

• Habitat for Humanity International
• Together Women Rise
• Team Rubicon

Finally, remember to let us know by going to give.org/charity-inquiry if you are interested in seeing a report on a charity not on the list and we will do our best to produce one.