The main duties of a charity trustee
The Charity Commission's guidance, Essential Trustee: What you need to know, sets out what is expected of trustees and it is one of its core publications. In November last year the Charity Commission opened a three month period of consultation on a proposed revised version of that guidance. It was felt by many in the sector that the guidance needed to be updated to clarify the legal obligations imposed on trustees and seek to better explain what the Charity Commission expects of them.
On 10 July the final revision was published and it breaks down the role of a trustee into six core duties. Here is a summary of those duties and practical tips trustees may wish to consider when carrying out those duties.
ENSURE YOUR CHARITY IS CARRYING OUT ITS PURPOSES FOR THE PUBLIC BENEFIT. The objects of a charity are its purposes – they set out what the charity was established to do. A charity's objects should satisfy the Charity Commission's public benefit test; that is, that the charity's purpose benefits the public. "Public benefit" is succinctly described, and there are links to associated guidance for a more thorough explanation of the term.
Constant review
It is stressed that a charity's status, operation and accountability are all reliant upon this test being satisfied, so it is important to constantly review and reassess what the charity currently does and plans to do. Trustees must therefore ensure that all of the charity's activities further or support its objects and that those activities are for the public benefit.
By emphasising the need for trustees to be familiar with the charity's purpose, the guidance identifies the practical advantage of a clear understanding of what the charity has been established to do. This will hopefully assist trustees in deciding what activities it should undertake.
The guidance also states that it is of equal importance for trustees to be aware of any specific criteria that proposed beneficiaries of a charity must satisfy, and any other restrictions that are placed on those who can benefit. Thus, when planning the future work of the charity, it is clear that the charity is reaching and benefiting the right people.
COMPLY WITH YOUR CHARITY'S GOVERNING DOCUMENT AND THE LAW. A charity's governing document establishes the charity's purpose and outlines the powers which will enable that purpose to be carried out, and the guidance emphasises the need for trustees to be very familiar with it.
All charities are regulated and governed by different legislation in accordance with the activities it undertakes. For example, charities employing staff need to be aware of employment law, charities providing registered care need to be aware of the requirements of the Care Quality Commission; both must adhere to health and safety legislation.
External advice
The guidance stresses that trustees are not expected to have full knowledge of all the legislation applicable to their charity but given that complying with the law is of paramount importance, it directs trustees to seek external advice where necessary to ensure that the charity is fully compliant.
It also reiterates the general obligation trustees are under to keep up to date with practice guides and newsletters, and to be aware of potential financial and reputational risks, and to put in place appropriate safeguards and practices to guard against such risks.
ACT IN YOUR CHARITY'S BEST INTERESTS. The best interests of a charity are furthered when trustees make decisions which ensure the objects of the charity are carried out. Before making any decisions, trustees should be sure they are adequately informed and have balanced all available options or solutions before any final decisions are made, there are no conflicting personal interests or loyalties and that none of the trustees will receive any benefit from the charity which has not been properly authorised.
Ultimate responsibility
Trustees are ultimately responsible for the management and control of a charity and they must ensure they act with reasonable care and skill. This means dealing with a conflict of interest swiftly and diligently, taking account of all relevant factors and making a choice which is reasonable in all the circumstances, and being open and transparent in its dealings. If trustees do all of these things, keep accurate records of all decisions made and actions taken and ask for independent advice when it becomes necessary to do so, they are perhaps less likely to be found responsible for any wrong decisions.
MANAGE YOUR CHARITY'S RESOURCES RESPONSIBLY. A charity's resources can take many forms; they could be cash, shares, property, works of art or literary works. Trustees are responsible for all of the assets of a charity, regardless of what forms those assets take and where the funding stream comes from. They should ensure there are tight financial controls, accurate records of income and expenditure are kept and written policies are in place.
Charitable land
Before considering any investment strategies or making any financial decisions, trustees should review their governing document to confirm there are no restrictions which prevent them from taking any particular course of action and that they have considered all the benefits and risks, obtaining independent advice where necessary.
There are special rules concerning charitable land and these are set out in Part 7 of the Charities Act 2011 – these rules must be complied with if land owned by a charity is to be leased or sold. Whether or not trustees are considering marketing land for sale or granting a lease, they must ensure they are adequately storing all title deeds to the property so they are readily available should the need arise to use or review them.
By efficiently and diligently managing the resources of a charity and regularly reviewing those resources to consider whether they continue to meet the charity's needs, trustees are able to identify and assess any risks, and reduce any exposure to risk.
ACT WITH REASONABLE CARE AND SKILL. The personal skills and experiences of a trustee are vital to the work of a charity. but it is important for trustees to be aware of instances in the life of a charity where independent advice should be sought so they are able to make informed decisions which benefit the charity and ensure they do not breach their duties.
It is prudent to appoint new trustees who may have a particular skill or knowledge which would be advantageous to the charity. Due consideration should therefore be given to the recruitment process and if appropriate, advertisements placed in suitable literature and on relevant websites. Some charities may employ their own professional advisers where particular expertise is required.
Rectifying mistakes
Unfortunately, mistakes do happen so as soon as trustees become aware that something has gone wrong, a trustee meeting should be called to discuss the options available to rectify that mistake and ensure any loss or damage is minimised as much as possible. It would also be prudent after the event to review how the mistake occurred and how further mistakes in the future can be prevented.
If the trustees know or suspect that the charity may be involved in a serious incident, a report should be made to the Charity Commission as soon as possible. Serious incidents include fraud, theft or the charity losing any of its assets or money, a large donation from an unknown source, links with terrorism, the charity having no policy to safeguard any vulnerable beneficiaries or suspicions, allegations and incidents of abuse or mistreatment of vulnerable beneficiaries.
It is possible that trustees may be found personally liable for any debts or losses that a charity may face but provided they act honestly and reasonably, this would be rare. It is therefore important that trustees act prudently throughout.
ENSURE YOUR CHARITY IS ACCOUNTABLE. Fulfilling this duty extends beyond compliance and ensuring the charity meets its accounting and reporting requirements. It also includes being accountable to anyone who has an interest in the charity. This could include members, beneficiaries, supporters and funders. Trustees should be able to demonstrate at all times that the charity is legally compliant and is efficiently run so as to further the charity's purposes.
It is therefore important for trustees to consider implementing a complaints procedure, so that the concerns of third parties and groups or individuals with an interest in the charity can be formally raised.
Subject to a charity's governing document and any relevant legislation, trustees have a power to delegate. Accordingly, it may be appropriate for trustees to delegate a decision they feel they are not qualified to make together. For example, the trustees may be thinking of investing funds and they may need to delegate decisions to a third party who has the necessary skill and expertise to make the right decision.
However, trustees should always make it clear in any dealings with a third party acting for and on behalf of the trustees that they are acting as an agent for the charity only.
Intervention powers
The Charity Commission is the independent regulator of charities in England and Wales. It works closely with charities to ensure they are accountable, meet their legal obligations and promote public trust and confidence. The Charity Commission has published a variety of guidance documents to assist trustees and runs an online enquiry system for which there is no charge.
Although the Charity Commission has wide powers to intervene into the running of a charity or its work, this is more likely to take place where there is evidence of misconduct. Ultimately, provided trustees comply with charity law and the requirements of the Charity Commission, ensure the charity does not breach any of the requirements or rules set out in its governing document, and act with integrity and avoid conflicts of interest there should be no cause for the Charity Commission to investigate a charity.
