Blog
Board members want to help make year-end events and fundraising campaigns successful. They often lean on their personal and professional networks and strive to develop appealing campaigns that keep donors engaged during the busiest giving season of the year.
Those efforts can potentially lead to conflicts of interest. With more spending, more vendor decisions, and more opportunities for personal introductions, even well-intentioned assistance can create private-benefit risks under IRS rules or raise questions from the Georgia Attorney General.
Why Conflicts of Interest Increase During the Holidays
Holiday galas, donor appreciation events, and seasonal campaigns require quick decisions about caterers, photographers, decorators, musicians, printing contractors, and similar services. Board members often respond by suggesting people they know personally, such as friends who run local businesses, relatives who offer creative services, or long-standing contacts they trust.
These recommendations may be offered with genuine goodwill, but because board members are fiduciaries, any personal connection can raise conflict-of-interest concerns.
The holidays also come with unique pressures: tight timelines, urgent purchasing needs, and last-minute sponsor commitments. Those conditions increase the likelihood that a board member’s suggestion is acted on without the usual competitive bidding or documentation. That’s exactly the type of shortcut that regulators scrutinize.
What Counts as a Conflict of Interest
Conflicts of interest occur when a board member’s personal or financial relationships could influence or appear to influence the organization’s decision-making. This includes:
- Their own business
- A relative’s business
- A close friend’s business
- Any arrangement that could provide a private benefit to someone connected to them
Under IRS rules, transactions that favor insiders can be treated as excess benefit transactions, especially if fair-market value and board oversight are not clearly documented. At the state level, Georgia expects fiduciaries to act solely in the organization’s best interest, and unexplained insider-connected transactions can flag broader governance issues.
Holiday-Specific Scenarios That Create Conflicts
Event Vendors
A director recommends a friend’s catering company or a business owned by a long-time acquaintance for the year-end gala. Even if the vendor is qualified, the relationship must be disclosed, and the board needs to evaluate the vendor independently.
Paid Holiday Services
Holiday parties and seasonal events often require photographers, videographers, musicians, or temporary staff. Using a board member’s relative or close friend for paid work is a conflict that requires recusal and documentation.
Holiday Purchasing and Gift Baskets
Year-end donor appreciation items, staff gifts, or branded holiday baskets frequently come from businesses suggested by board members. These purchases should be vetted like any other procurement decision.
Seasonal Sponsorships
A board member’s company might want to sponsor a holiday event in exchange for advertising or promotional exposure. These benefits must be assessed at fair-market value and approved without the board member’s participation.
“Shop Local” or Community Tie-Ins
Some nonprofits highlight local businesses during holiday campaigns. Featuring a business owned by or connected to a board member can appear like an endorsement or misuse of charitable assets if not properly reviewed.
Year-End Vendor Renewals
Relying on last year’s vendors without checking pricing or competitive options can unintentionally replicate a conflict from prior years.
In-Kind Holiday Donations
When a board member’s business donates products or services for a holiday event, the promotional value they receive must be proportional and documented.
Why These Situations Raise IRS or Attorney General Concerns
Holiday activities involve large, visible expenditures that are often funded by donors. Regulators look closely at whether these funds indirectly benefit insiders. Even if pricing is fair, the absence of documented bidding, market comparisons, or board minutes can create an appearance of impropriety.
That appearance alone can put the organization under scrutiny.
The IRS focuses on whether a transaction provides any private benefit that is more than incidental. The Georgia Attorney General examines whether fiduciaries allowed personal relationships to influence organizational spending. Year-end contracting without proper documentation is one of the most common triggers for these reviews.
Proper Procedures: Disclosure, Recusal, and Documentation
Conflicts of interest are not inherently improper. Problems arise when they are not handled transparently. Best practices include:
- Disclosure: Board members must identify any personal or financial connection to vendors, sponsors, or in-kind donors.
- Recusal: Anyone with a connection must leave the room (physically or virtually) during discussion, and voting.
- Documentation: Minutes should reflect the recusal, the nature of the conflict, how the vendor was vetted, and any comparison quotes or market-rate determinations.
- Independent approval: Only disinterested board members should approve the transaction.
These steps protect the organization and demonstrate that decisions were made objectively, even if the chosen vendor is connected to a board member.
Work With an Atlanta Nonprofit Attorney to Navigate Holiday Conflict Risks
The holidays are a valuable time for fundraising, donor engagement, and community events, but they also heighten the potential for conflicts of interest. The Law Office of Cameron Hawkins helps Georgia nonprofits establish clear policies, review vendor relationships, and document recusals to reduce risk during year-end activities and throughout the year.
For guidance tailored to your organization, call (678) 921-4225 or contact us online to schedule a consultation.
