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Charity Commission guidance for trustees

Read our advice to help trustees in relation to the Charity Commission's guidance on charity governance.

The Charity Commission has recently launched a campaign aimed at refreshing the knowledge of trustees in relation to charity governance. It comes at a time when there has been uncertainty in the sector as a result of the pandemic, in order to help trustees run their organisations and has been informed by the Charity Commission’s research into trustees’ knowledge and awareness of their responsibilities, as well as its five minute guides on:

  • Financial oversight
  • Achieving your charity’s purpose
  • Good decision making
  • Addressing conflicts of interest
  • What to file with the Charity Commission and support that it offers

We have set out some information below to tackle the five questions the Charity Commission asked, which will help trustees:

  • Does every decision help your charity with its mission? 
  • Could your charity be drifting into activities that your charity is not set up to do? 
  • Is your charity reporting the right things at the right time? 
  • Could you spot a conflict of interest and manage it? 
  • Is there more you can do to prevent fraud?

Purpose of the charity

Whenever trustees are making decisions about the strategy of the charity, the starting point should always be the objects of the charity as set out in its charity governing document. The objects are the heart of what the charity is set up to do and who it is set up to help. If trustees have any queries or concerns about what they are being asked to decide upon, and whether it is in the best interests of the charity, this is the place to start.

The next step is to look at the powers of the charity; what can it do? Charities diversify more than ever these days, for many reasons, including to increase the income of the charity in order that it can continue to carry out its objects. However, trustees must take care to ensure that any new activity it intends to carry out aligns with the charity’s purpose. Similarly, if a charity applies for funding, are there any conditions on the funding which might not be in the best interests of the charity, or which might not match the charity’s purpose?

Remember, charities are set up for the benefit of the public, and so trustees should be clear about who it is that benefits from their work and be vigilant in respect of any private benefits to individuals.

Charity governing document

Ensure that you regularly review the charity objectives and purpose against its current operation, to be sure that what the charity does reflects its purpose. If a charity has diverged from its purpose, it is important to get it back on track or to consider whether the needs of the community it was set up to serve have changed and whether the charity needs to change. Any changes are likely to need to be done in conjunction with the Charity Commission and we can advise on this if you think this might be the case.

Trustees should carefully monitor and record the use of charity assets, funds and resources, as they can be held personally liable in some cases.

When making decisions where any private individual may benefit, even incidentally, or which involve a sale of any assets, trustees should refer to the governing document, which should set out what can and cannot be done in these circumstances. It is therefore very important that the governing document is reviewed and kept up to date.

Could your charity be drifting into activities that your charity is not set up to do? 

Any decisions made by trustees should be well-informed and in the best interests of the charity. This includes having regard to the purpose (as mentioned above) but also ensuring that there is sufficient information, of the right quality, to make such decisions, with reference to all relevant factors. Decisions will of course vary depending on factors such as risks, complexity, financial resources and more.

It is important in decision-making to ensure that accurate and contemporaneous records are kept, essentially allowing for an audit trail of decisions. This should include reasons for the decisions, the results of any votes, any dissention, any conflicts of interest and the options considered when making the decision.

If trustees feel that they do not have sufficient data to make a decision, or that the data provided is not of sufficient quality, they are entitled to defer a decision and ask for more information. Trustees are also entitled to ask for independent advice from professional consultants.

Board makeup

Ensure that you are being asked to make decisions with all the necessary and relevant facts and information and ask the staff and executive teams within your charity for more, if it is needed.

Make sure that the board is made up of people with the appropriate skills and qualities for the charity, and that the relationship between trustees is one which fosters constructive challenge and debate, as well as robust decision-making.

If trustees think they may need consent from the Charity Commission for an activity, take independent advice before making a decision.

Reporting to the Charity Commission 

The Charity Commission requires and expects certain information to be provided to it at certain times. For example, if there is a change to the trustees, to contact details or governing documents. These changes can often be notified using the Charity Commission’s website and you should be provided with a password for access.

Charities are also required to file annual returns and accounts.

In the event of something going wrong, which the trustees consider might have a detrimental effect on the charity, it can and should be reported to the Charity Commission as a serious incident.

Lessons learned review

Whether or not the problem needs to be reported to the Charity Commission, if trustees feel that there is a serious problem, they should act quickly to prevent further harm, or any loss or damage, as well as consider who might need to be informed and how (i.e. a charity’s funders or donors, or, in the event of a crime, the police).

Carry out a lessons learned review and make any changes to prevent something similar from happening in the future.

Charity Commission conflict of interest

Conflicts come in two varieties: financial conflicts of interest and conflicts of loyalty. Trustees must be able to identify conflicts.

Financial conflicts relate to matters such as a trustee (or other connected person) standing to benefit financially from a decision being made by the trustees (not including expenses). This could be where a trustee owns a company which the charity is considering employing to carry out some work on its behalf, meaning that the trustee would gain a financial benefit as a result of their company being paid for that work. This is still a conflict, even if the company represents the best value.

Conflicts of loyalty arise when a trustee may be prevented from making a decision in the best interests of the charity, perhaps where they are connected to another charity’s organisation and the two charities are bidding for the same funds.

Conflicts must be dealt with in order for trustees to be able to act in the best interests of the charity, without influence from any personal interest. Managing conflicts may vary in each case, and trustees should consider removing the conflict, where possible.

Conflicts of interest policy

Ensure there is a robust conflicts of interest policy in place, as well as confirming that your governing document contains all relevant and up to date provision about dealing with conflicts.

Ensure that conflicts are identified and declared at the beginning of all meetings – all trustees should be made aware of what constitutes a conflict and how to declare it.

Keep full and accurate records of conflicts.

Fraud in charities

Charities must only spend money on furthering the purpose of the charity and trustees are the guardians of the assets of the charity.

Trustees should have internal controls in place which allow for the identification of risks and the recording of the charity’s finances. The risks will differ between charities, and it is important that trustees make sure that they know the potential risks their charity could face, and how these can be identified, mitigated and managed.

Charity finances

Trustees should make sure that the charity has a budget and business plan and that it is being adhered to, as well as being regularly reviewed. This should assist in being able to identify potential issues early on and being able to agree how to address them.

Make sure that you have all the relevant policies and procedures in place for things such as fundraising, investment and trustee expenses and that they comply with the Charity Commission guidance and charity law.

Responsibilities of trustees

Trustees duties are many, varied and can seem daunting. If you have any questions or concerns, or would like some advice on your policies and procedures, codes of governance, trustee duties or your charity’s governing document, or any other charity matter, please contact us.

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