Your conflict of interest policy should lay out the following actions:
Require disclosure of potential conflicts
Board members, staff, and volunteers disclose the connections, if any, they have to any organization or person that the board is considering for involvement in foundation activities. Some boards create a disclosure statement at the beginning of each year to identify the bulk of potential conflicts. Any interests that arise throughout the year should also be disclosed as they arise.
Determine which connections are actual Conflicts of Interest (COIs)
The board determines whether the connection is actually a conflict, and if the conflict exists, whether it is material enough to be of practical importance. After the board understands the circumstances of the potential conflict, the person who has the connection recuses him/herself from the discussion and voting to decide whether or not it is an actual conflict of interest.
See How can the board determine if a connection or relationship is actually a conflict of interest?
For actual COIs, recuse from decision making
Persons with conflicts of interest may offer information to help the board make the impending decision. However, after offering this information, s/he leaves the meeting when the board discusses and votes on the decision. A board may choose to allow the person in conflict to remain in the room under certain circumstances, especially if it is not a financial conflict of interest.
Require competitive bids
Financial conflicts of interest should be resolved, when possible, by collecting competitive bids to ensure a fair price for every significant transaction.
The board keeps a record of the action it takes for every conflict of interest that arises. Document which person had the conflict of interest, how they recused themselves and for what decisions, and any other information that indicates how the board ensured it made an unbiased decision.
Each trustee should sign the conflict of interest policy document, and the board should review the policy annually. If a board or staff member violates the policy, the foundation should consider taking disciplinary steps.