Charity trustees: know your duties

3 February 2022

It is has recently been widely published in the mainstream media that Naomi Campbell’s Fashion for Relief charity is currently subject to an ongoing investigation by the Charity Commission for trustees alleged breach of duties. Whilst action against charity trustees is rare it is important to be aware of the legal duties and responsibilities associated with the role and the risk of action taken by the Charity Commission or by the courts.

A trustee of a charity has six main duties as follows:

  1. Ensure your charity is carrying out its purposes for the public benefit
  2. Comply with your charity’s governing document and the law
  3. Act in your charity’s best interests
  4. Manage your charity’s resources responsibly
  5. Act with reasonable care and skill
  6. Ensure your charity is accountable

Taking each of these in turn:

A charity’s “purposes” are usually set out in its governing document. If a trustee allows the charity’s assets to be applied for any other purpose then they will be in breach of trust. In the absence of regular review of the charity’s purpose in our experience it is easier than one might expect to drift away from the charity’s original purpose and for a trustee to find themselves in troubled water for this reason.

Ensuring compliance with the charity’s governing document and the law has a broad application. A trustee should ensure familiarity and understanding of the charity’s governing document and the Charity Commission guidance in relation to the role of trustee.

Acting in a charity’s best interests extends to acting in the best interests of its beneficiaries. A trustee should not allow personal interest to interfere with this obligation. He or she should act with integrity and disclose any conflict of interests. A trustee should also not receive any personal benefit from the role unless the governing documents authorises it or an order has been obtained from the Charity Commission.

A trustee must safeguard a charity’s assets and ensure that they are properly handled in accordance with the charity’s purpose. The scope of assets extends to staff and property. Fraud prevention also comes under a trustee’s duty to manage a charity’s resources responsibly. It is for the trustees to ensure that assets are managed correctly and not subject to undue risk. In our experience prevention is the best cure when it comes to fraud. A robust risk assessment should be conducted irrespective of the size and stature of the charity. Adequate systems should also be implemented to detect fraud of its committed and there must be a plan in place to ensure an effective response. 

A charity trustees duty to act with reasonable care and skill necessitates taking appropriate advice when required. A trustees duty will be greater if a trustee has (or claims to have) any special knowledge or expertise.

Finally, a trustee is tasked with ensuring that the charity is accountable not just to the Charity Commission but within the charity itself.

In the case of Fashion for Relief, which has purposes to relieve poverty and advance health and education, it was initially subject to a Charity Commission compliance case following “consistent late filing of accounts and lack of evidence to show conflicts of interest were being managed”. The Commission subsequently issued the trustees with an action plan with the objective of improving the charity’s financial management. A review of the charity’s response to this plan has now given rise to an inquiry, which will examine:

  1. whether those in control of the charity have properly exercised their legal duties and responsibilities under charity law
  2. the financial management of the charity, including payments made to a trustee for services provided to the charity and the level of charitable expenditure
  3. the governance and management of the charity by the trustees including the failure to file statutory returns on time
  4. whether there has been misconduct and/ or mismanagement by those in control of the charity

The inquiry opened on 8 November 2021 and it could take many months to complete. In the meantime, the trustees will be aware that should they be found to have acted in breach or duty then not only might they face sanctions from the Charity Commission but each trustee can be found personally liable for any loss suffered as a result of the breach of duty. A trustee acting in breach of duty, whilst rare, might also be subject to a criminal prosecution.

Should a charity find itself subject to investigation by the Charity Commission and or subject to a civil or criminal claim as a consequence of alleged breach of duty it is important to ensure that it is handled correctly from the offset. Trustees may need separate legal advice subject to the nature of any allegations made and all parties should be mindful of the risk of reputational damage. We would reiterate that personal claims against trustees are not common but nonetheless the importance of ensuring good governance and compliance with a trustees duties and obligations cannot be under-estimated.

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We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

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