Are you clear about your responsibilities as a charity trustee?

Insights - 04/12/2017

No matter how big or small the board of trustees or charitable income, each and every trustee shares a set of joint and several responsibilities. It’s important to understand why you should not delegate those responsibilities to paid employees or simply allow decisions to go through “on the nod”.

Being a trustee, especially of a cause that you feel passionate about, is a privilege but with privilege comes responsibility. The duties of a trustee are imbedded in our history and date back to the Crusades. Wealthy landowners travelling to foreign parts needed to find a method of leaving their affairs in the hands of someone while they were away. No legal ownership passed, the chosen person held such property on trust and the landowner expected to come back and find that his financial affairs and investments had been managed properly and that the trustee had remained loyal. Naturally disputes arose and so was born the legal concept of equity, and the settling of equitable disputes in the newly founded court of Chancery.

What has this to do with a modern day trustee you may ask? It is those very ancient traditions of loyalty and fiduciary duty that underpin the wider modern day duties of a trustee. The primary responsibilities of a charitable trustee are to deliver the aims of the charity for the benefit of its beneficiaries, to protect its assets, to act in the interests of the charity at all times, to avoid conflicts of interest and ensure accountability. All of which can be summed up as being loyal to the purpose and interests of the charity.

In carrying out your responsibilities you must act with skill and care, indeed there is an additional test for those trustees who have special skills, such as accountants or lawyers on charitable boards. The fact that you are not being paid for the exercise of this skill and care relates back to the duty of loyalty, loyalty to the cause and your beneficiaries rather than to your own pocket or to shareholders. So is it right for a board to delegate and rely upon paid staff or the executive team to discharge these duties on their behalf even where their skills are greater? Is it the trustees who are responsible for running the charity or the paid executive?

The answer lies in the definition under S 177 of the Charities Act 2011 “Trustees are the persons who have the general control and management of the administration of a charity”. Even if the senior paid staff naturally have better leadership and management skills it is YOU as trustees who bear the overall responsibility for the running of the charity. As a board you should make decisions collectively. This does not mean that the accountants make all the accounting decisions, the lawyers make the legal decisions and the investment team make investment decisions.

Even on larger boards where trustees have specific responsibilities within that board, when it comes to making a decision you stand or fall together. It is not the treasurer who signs off the annual accounts, it is all of you, and if that means the treasurer needs to illustrate the figures in a more digestible format or you need to spend time learning how to read some management accounts, then that is what is required of you to fulfil your fiduciary duty.

This is quite a sobering thought and one that drives home the level of trust that is placed in trustees as individuals and boards collectively as they make decisions that impact on the beneficiaries of the charity. Perhaps an easy rule of thumb is the headline test and there have been plenty of them in the charitable sector recently. Would the headline read as a feeble excuse for not knowing what was going on in the administration of your charity or as a vindication that you had complied fully with your fiduciary duties?

Morrisons Solicitors advises charities and not for profit organisations on all aspects of their structure, governance and delivery, and can guide you in all aspects of your duties to achieve the best outcome for your beneficiaries. If you would like to discuss your requirements further, please contact Michele Price on 01737 854 591 or email michele.price@morrlaw.com. Or, if you would like to find out more about our Not for Profit sector please click here.