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Better Business Bureau ®
Start With Trust®
Central Virginia
Standard 5

No transaction(s) in which any board or staff members have material conflicting interests with the charity resulting from any relationship or business affiliation. Factors that will be considered when concluding whether or not a related party transaction constitutes a conflict of interest and if such a conflict is material, include, but are not limited to: any arm's length procedures established by the charity; the size of the transaction relative to like expenses of the charity; whether the interested party participated in the board vote on the transaction; if competitive bids were sought and whether the transaction is one-time, recurring or ongoing.

Information Needed from Charity to Determine Compliance:

The charity provides information about related-party transactions, on a form provided by the Alliance. The Alliance will also review the IRS Form 990 and notes to the charity's financial statements for applicable information about related-party transactions.

Application:

This standard does not intend to suggest that every related-party transaction results in a material conflict of interest. As each potential conflict of interest situation presents a different set of circumstances, a definitive statement of when such a conflict occurs is not possible. However, in general, a charity will not meet this standard if one or more of the following circumstances exist:

  • The charity conducted substantial transaction(s) with board member or staff -related firms and took no steps to ensure arm's length transactions. Examples of such steps: seeking at least two other competitive bids and having the interested board member(s) abstain from the decision to hire the interested individual or firm with which he or she is affiliated.


  • The transaction is of such a large amount and/or is in effect over such a long period of time that it is unlikely that the transaction could qualify as arm's length.


  • Individually, the related-party transaction amount may be small. However, the charity may have a number of related transactions in the past year, that, when combined, constitute significant related-party activity.