Protecting Your Scholarship Program from Conflict of Interest Risk
Julia here. Erika handed over the newsletter reins to me this week. Probably because she didn’t want to talk about conflicts of interest.
Well, honestly, neither do I.
I tried to come up with a cute and relevant story like Erika does each week, but there really isn’t a fun way to dress up conflicts of interest.
It’s not the most exciting thing we do around here, but it is REALLY important.
And because I care about you, friend, I’m going to cut right to it and give you three easy ways to manage them.
Here we go!
Unmanaged Conflicts of Interest Pose a Legal Risk to Your Organization. Do You Know If You Have Any?
It’s not uncommon or unreasonable to have volunteer committee members recognize one another, or your applicants and their families. This is especially true for smaller communities or when you are (rightfully) involving education-centered professionals on your committee from local schools or family-serving nonprofits.
These individuals add real value. Their firsthand knowledge of students and families strengthens reviews and leads to better decisions.
The problem is when a committee member has a direct personal relationship with a student or their family.
In these cases, even well intentioned reviewers can introduce bias into the process—either consciously or unconsciously—by favoring or disadvantaging a student based on personal knowledge that falls outside the application itself. This undermines the fairness and integrity of your selection process.
Beyond questions of fairness, these situations also carry regulatory risk. Direct relationships may be interpreted as creating an opportunity for private benefit, which can conflict with IRS requirements governing charitable organizations.
For leadership, the implications are significant. These issues don’t just affect a single award decision or program; they can put your organization’s broader charitable standing at risk.
The good news? Managing conflicts of interest doesn't need to be stressful. You just need one form and a simple process to keep things risk-free.
Get Ahead of Potential Conflicts in 3 Easy Steps.
Request a signed disclosure form from all committee members.
A disclosure form should include an overview of its purpose and why conflicts of interest are being managed, definitions of what relationships pose a conflict, and a space to disclose any organizations in which they participate as an employee or officer.
The main goal here is understanding whether a reviewer works at a school or community organization that overlaps with the scholarship's population. That way you can flag potential conflicts before reviews begin, or intentionally place that reviewer on a different committee.
Set a recusal protocol.
Your reviewer training should make it clear what to do when someone recognizes an applicant. This includes blind reviews where the information provided makes a reviewer think they may know the identity of the person.
If you're using an online system, the first question in your evaluation form can be, "Do you have a conflict of interest with this student?" If they select yes, they skip that student's evaluation. Work with your tech provider to set the system up to move them to the next applicant automatically.
It’s staff responsibility to review these forms and confirm that anyone with a conflict of interest did not score and does not participate in any subsequent discussions or selection meetings regarding that applicant.
Document the process.
Documentation should happen in two ways.
First, document the administrative process so all staff know the steps for collecting disclosure forms, reviewing recusals, and flagging issues.
Second, in the event of a conflict of interest, document recusals in the committee notes for that scholarship selection. Auditors will want to know if there were potential conflicts and how they were managed.
If application reviews are already underway and you’re realizing you don’t know about potential conflicts, don’t panic! There’s still time to send out an email blast to your committee members and collect this information.
We work with scholarship providers every year to strengthen committee management and compliance practices. We provide expert guidance to recruit, train, and manage strong review committees that will further your program goals and create impact for students in your community.
If you want to be more prepared before your next committee cycle, let’s talk.
