How to be an effective charity trustee

The Charity Commission has called for higher standards among charity trustees. So, what do members working in or with charities need to know?

The Charity Commission recently published a new series of guides for trustees as a part of its ongoing campaign “to raise awareness of core trustee duties”.   

These are additions to the Commission’s collection of short Five-Minute Guides, which aim to increase knowledge of the duties of a trustee, including delivering purpose, managing conflicts of interest, managing finances and safeguarding people.  

Although aimed at trustees, these guides and the information they contain also provide a useful resource for those of us advising or working with charities.

Part of governance responsibility is to ensure that individually and collectively trustees all understand their role within the organisation and their particular role as a trustee. The phrase ‘as described in its governing document’ is particularly important.

Research carried out by the Charity Commission shows that almost all trustees (when questioned) felt confident in their role managing or governing their charity, but on average answered only seven out of 10 questions relating to that role correctly. 

If you are an advisor, accountant or a trustee of a charity yourself, do you know the duties and responsibilities of a trustee board and how to be an effective trustee? Would you be confident that you could describe all the elements of your role correctly? 

Delivering purpose 

A charity’s board of trustees or its governing body takes overall responsibility for the charity’s work and for its good governance. This ensures it’s effectively and properly run, and is meeting its overall purpose as described in its governing document. Part of that governance responsibility is to ensure that individually and collectively trustees all understand their role within the organisation and their particular role as a trustee.   

The phrase ‘as described in its governing document’ is particularly important. While most advisers or trustees think they are sure of their charity’s objectives, in practice sometimes ‘mission creep’ has occurred over a number of years, and the charity has moved some distance from where it started. Understanding the defined objects and, as a result, the charity’s purpose, is key to delivering. 

Managing conflicts of interest 

If a trustee or person connected with them is receiving financial benefit from a trustee decision, that’s a financial conflict of interest. If a trustee is also an employee, volunteer, adviser to the organisation, the founder, and so on, the role can create a conflict of loyalty. In those cases, it’s vital to understand the trustee’s governance role, and which ‘hat’ they wear.

Reporting Information 

Do you as a charity trustee, employee or adviser know what has to be reported to the Charity Commission and when? 

Depending upon the size of your charity, an annual return must be completed and filed each year, trustee and charity details kept up to date and a set of accounts submitted within 10 months of your year-end. If the charity is also registered at Companies House you will have a requirement to deliver a further copy of the accounts there within nine months of the year-end. You may also be required to prepare and deliver a tax return to HMRC.   

Making decisions 

The Charity Governance Code states that “the board makes sure that its decision-making processes are informed, rigorous and timely, and that effective delegation, control and risk-assessment, and management systems are set up and monitored.” 

We know that making decisions is not always a case of right or wrong, but the principles set out in the guides will assist trustees and others in making informed decisions that ensures they:

• act within their powers, following the charity’s rules and relevant law 
• act honestly and with good intentions 
• are sufficiently informed and take advice where required  
• take account of the relevant and ignore the irrelevant 
• manage conflicts of interest.

And ultimately, “make a decision that is within a range of decisions that a reasonable body of trustees could make”. Boards should keep records of any discussions and the decisions made. 

Collective responsibility  

When discussing finance with a board of trustees it is sometimes the case that you hear, “this is a matter for the treasurer” or for “our accountant”, but however much they may wish it, this is not completely true. An accountant, adviser or the treasurer may manage the finances day to day and provide an expert view, but responsibility for those finances remains collective. 

Every trustee is responsible for ensuring they understand the finances of their charity, and putting controls in place so those finances are maintained safely.

John Howard is Partner and Head of Charities at top accountancy firm Azets.

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