Legacy Haven Academy Conflict of Interest Policy

Article I: Purpose

The purpose of the conflict of interest policy of Legacy Haven Academy Foundation (the "Academy") is to protect the Academy’s interest when it contemplates entering into a transaction or arrangement that might benefit the private interest of an officer, director, or key employee or result in a possible excess benefit transaction (Internal Revenue Service, 2025a). This policy supplements, but does not replace, applicable state and federal laws governing conflicts of interest for nonprofit and charitable organizations, including Arizona Revised Statutes (A.R.S.) Title 10 and Title 38 (Arizona Legislature, n.d.-a; Arizona Legislature, n.d.-b). The policy complies with A.R.S. § 10-3864, requiring the board of directors to adopt a policy to ensure transactions with interested persons are fair and reasonable to the corporation (Arizona Legislature, n.d.-c). It also addresses A.R.S. § 38-503, which prohibits public officers or employees (or their relatives) with a substantial interest in a public agency decision from participating unless exempted (Arizona Legislature, n.d.-a).

The Academy, an educational foundation serving orphaned and homeless youth in Mohave County, Arizona, through hands-on learning, mentorship, and holistic development (Legacy Haven Academy, n.d.), recognizes that conflicts may arise in board decisions involving vendors, service providers, or resource allocations. This policy promotes transparency, accountability, and decisions in the best interest of the Academy’s mission to provide hope, purpose, and lifelong learning opportunities, while ensuring compliance with IRS requirements for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code (Internal Revenue Service, 2025b).

Article II: Definitions

1. Interested Persons. Any director, principal officer, member of a committee with board-delegated powers, or key employee of the Academy (collectively, "interested persons") who has a direct or indirect financial interest, as defined below, is an interested person.
2. Financial Interest. A person has a financial interest if, directly or indirectly, through business, investment, or family, they have:
   • An ownership or investment interest in any entity with which the Academy has a transaction or arrangement;
   • A compensation arrangement with the Academy or any entity or individual with which the Academy has a transaction or arrangement; or
   • Other significant financial interest in the transaction or arrangement.
   A financial interest is not automatically a conflict of interest unless the board or committee determines it to be so, consistent with IRS guidelines (Internal Revenue Service, 2025a). Family members include spouse, siblings, parents, grandparents, children, grandchildren, great-grandchildren, aunts, uncles, nieces, nephews, and spouses of the foregoing (National Council of Nonprofits, n.d.).
3. Substantial Interest. As defined under A.R.S. § 38-502, a substantial interest exists if a person or their relative has a direct or indirect interest in a decision with a foreseeable, material effect on their financial interest, excluding de minimis interests (Arizona Legislature, n.d.-a). For nonprofit purposes, this aligns with transactions involving interested persons under A.R.S. § 10-3831 et seq., requiring disclosure and recusal unless approved (Arizona Legislature, n.d.-d).

Article III: Procedures for Disclosure

1. Duty to Disclose. Each interested person shall disclose to the Academy’s board of directors (the "Board") any financial interest in a transaction or arrangement under consideration by the Academy. Disclosure includes the existence and nature of the interest, without discussing specifics that could compromise objectivity (Internal Revenue Service, 2025a). Disclosures must be made in writing and annually, as required for IRS Form 990 compliance (BoardEffect, 2024).
2. Annual Disclosure Statements. All interested persons shall annually sign a statement affirming that they:
   • Have received a copy of this policy;
   • Have read and understand this policy;
   • Agree to comply with this policy; and
   • Understand that the Academy, as Legacy Haven Academy Foundation, is a charitable organization and trust that it is their duty to conduct its affairs in accordance with this policy and the Foundation’s articles of incorporation and bylaws.
   This annual affirmation aligns with best practices for Arizona nonprofits to mitigate risks under A.R.S. § 10-3833, which requires disclosure of material facts in conflicted transactions (Arizona Legislature, n.d.-d; Harbor Compliance, n.d.).
3. Mohave County Considerations. While Mohave County does not impose unique nonprofit-specific conflict regulations beyond state law, any Board member who is also a county officer or employee must comply with A.R.S. § 38-503 exemptions and disclose substantial interests in county-related decisions, such as grants or facilities (Mohave County, 2024).

Article IV: Determining Whether a Conflict of Interest Exists

After disclosure, the Board secretary shall determine if a conflict of interest exists, considering whether the relationship or financial interest compromises the disinterested judgment of the interested person in exercising their duties to the Academy. If a conflict is deemed to exist, proceed to Article V. This process ensures compliance with IRS expectations for objective review and Arizona’s requirement for fair transactions under A.R.S. § 10-3834 (Internal Revenue Service, 2025a; Arizona Legislature, n.d.-d).

Article V: Procedures When a Conflict of Interest Exists

1. Participation Prohibition. An interested person may not vote on or participate in Board or committee deliberations regarding the transaction or arrangement in which they have a financial interest. They may provide information if requested but shall not be present during voting or discussion, except to answer procedural questions (National Council of Nonprofits, n.d.).
2. Approval Process. The disinterested members of the Board or committee shall decide by majority vote whether the Academy can obtain a more advantageous arrangement with reasonable effort from an unrelated person. If so, the proposed transaction shall not be approved. Otherwise, the Board shall determine by majority vote of disinterested members whether the transaction is in the Academy’s best interest, for its own benefit, and whether it is fair and reasonable. Approval requires documentation of the basis for approval, comparable alternatives considered, and management of the conflict, per IRS excess benefit rules under 26 U.S.C. § 4958 and A.R.S. § 10-3835 (Internal Revenue Service, 2025b; Arizona Legislature, n.d.-d).
3. Documentation. Minutes of Board meetings shall reflect disclosures, recusals, and votes. The Board chair shall ensure records comply with Arizona corporate records requirements under A.R.S. § 10-3816 (Arizona Legislature, n.d.-e).

Article VI: Violations of the Conflicts of Interest Policy

If the Board has reasonable cause to believe an interested person has failed to disclose actual or possible conflicts, it shall inform the individual of the basis for concern and afford an opportunity to explain. If concerns persist, the Board may take appropriate disciplinary or corrective action, including removal from position per bylaws. Violations may trigger IRS reporting on Form 990, Part VI, Section B, and potential penalties under A.R.S. § 38-510 for knowing violations (Internal Revenue Service, 2024; Arizona Legislature, n.d.-b).

Article VII: Compliance and Review

The Board shall annually review this policy and ensure all interested persons complete disclosure statements. The policy shall be provided to new Board members upon appointment. This policy supersedes any prior versions and may be amended by majority Board vote. For questions, contact the Board secretary.

Acknowledgment: I hereby affirm the above statements and agree to abide by this policy.

Signature: _______________________________ Date: ________________

Printed Name: ____________________________ Position: _______________