What to do when a charity trustee has a conflict of interest
Thursday, 13 December 2018
All trustees have a legal duty to act only in the best interests of the charity. Trustees’ personal and professional connections can bring benefits to the work of a charity, often forming part of the reason why an individual was asked to join the trustee body. However, those same reasons can give rise to conflicts of interest.
The proper handling of conflicts of interest is an essential part of decision making by trustees.
How do you manage conflicts?
There are three keys steps:
- Identify the conflict
- Prevent the conflict from affecting the decision
- Record the conflict and how it was managed
Not all conflicts can be managed. Sometimes the charity should not enter into the transaction.
Can trustees benefit from their charity?
The usual answer is no. However, trustees can benefit from their charity, where there is an explicit authority in place before any decision conferring trustee benefit is made. Of course, any payments made to trustees must still be to the benefit of the charity and be a suitable use of charitable funds.
The authority usually comes from the governing document. For example, a sporting charity may allow a trustee to use the facilities of the charity on the same terms as any other beneficiary. Or a charity may decide to engage professional services from a trustee or organisation connected to them.
The governing document will usually include certain conditions that must be complied with for the transaction to be permitted.
- Ensure trustees declare their interests so conflicts can be managed.
- Manage identified conflicts. Also consider public perception and the impact on the reputation of the charity.
- If you’re considering entering into a transaction that benefits a trustee, not only ensure the conflict is managed, but also ensure the charity is authorised to enter into the transaction (usually by its governing document).
With MHA, we have created 11 Key Steps for Trustees, 1 Giant Leap for Your Charity, a monthly guide for trustees to allow them to upskill and improve standards in a stepped and measured way. Each month’s article covers a different area. The article for month 11 focuses on conflicts of interest and can be viewed here.
For more information on how we can help, please speak to your usual Larking Gowen contact.
Call 0330 024 0888 or email firstname.lastname@example.org