Most family foundations prefer to focus on the business of giving, without having to worry about tripping over the sometimes obscure rules and regulations that govern this work. But the fact is that family foundation boards need to be aware of potential potholes on the road named philanthropy. Driving blind down this road can get you into trouble.

One potential pothole is real or perceived conflict of interest, a topic frequently misunderstood, and often confused with self-dealing.

Briefly, a conflict of interest can arise when a foundation board member or officer has a personal interest in a transaction that may be inconsistent with the best interests of the foundation. Another way to think of this is that under fiduciary standards, the duty of loyalty requires that board members set aside personal interests and act solely in the best interests of the foundation.

Foundations also need to be mindful of public perception and the press. An appearance problem can lead to unwelcome publicity. A story is a lot less intriguing when an organization can clearly explain how its board arrived at a grant-making decision and how a conflict of interest policy was followed.

Lastly, the philanthropic community and the nonprofit community at large have seen the development of more guidelines and standards for good practice. The Council on Foundations’ Stewardship Principles for Family Foundations recommend that conflict of interest policies be written and put in place.

Read the full article about potential foundation issues by Anne Etheridge at the National Center for Family Philanthropy.