The role of a charity trustee is broad and at times cumbersome. The contribution a trustee makes is often under-appreciated. Individuals often take on the role with the best of intentions, but with little understanding of what it entails and of the potential personal liability. The Charity Commission’s recent decision to dissolve the charity known as Save the Needy Worldwide, a charity set up to provide humanitarian assistance, and hold the trustees personally accountable, should come as a valuable reminder to charity trustees of their position.
The role of charity trustees
The trustees have overall control of the charity and are responsible for managing the organisation and ensuring it is doing what it was set up to do. Charity trustees must comply with a number of duties, the six main duties being:
- To ensure the charity is carrying out its purpose for the public benefit;
- To comply with the charity’s constitution and the law;
- To act in the charity’s best interests;
- To manage the charity’s resources responsibly;
- To act with reasonable care and skill; and
- To ensure the charity is accountable.
If charity trustees fail to meet their obligations and they have either acted dishonestly and/or unreasonably, they can be held personally liable and required to compensate their charity for any financial loss caused.
The role of the Charity Commission
The Charity Commission is the regulator for in excess of 165,000 registered charities in England and Wales. The Commission is responsible for ensuring that charities meet their legal requirements, and takes enforcement action where there is malpractice or misconduct. It produces extensive and detailed guidance, which can be found here to help charities and their trustees to develop high standards of governance and to avoid malpractice.
If things go wrong… The case of Save the Needy Worldwide
In the case of Save the Needy Worldwide the Charity Commission conducted an inquiry into, amongst other things, the administration, governance and management of the charity by the trustees, the conduct of the trustees with a particular focus on financial management and whether the trustees had complied with and fulfilled their duties and responsibilities as trustees under charity law.
It its report published on 21 February 2019 the Commission concluded that there had been misconduct and/or mismanagement by the trustees which put the charity’s property at risk and caused it to suffer loss as a result. They considered that the trustees had:
- failed to comply with the Commission’s Action Plan in June 2016;
- failed to comply with a legal direction to supply information to the Commission;
- placed the charity’s funds at risk and subsequently lost them;
- were not sufficiently aware of the activities of the charity;
- could not fully account for the charity’s funds in accordance with charity law.
This resulted in two of the trustees being disqualified from acting as a trustee or holding an office or employment in a senior management function in any charity in England and Wales, and in the dissolution of the charity itself.
The full report of the inquiry is available here.
It is not unusual for trustees of smaller charities to get caught out as a result of being poorly informed and inadequately trained to manage and run their charity. We have had a similar case to Save the Needy Worldwide only very recently, in which we helped the charity address the Charity Commission’s concerns which prevented the dissolution of the charity and protected the trustees from being held to account personally.
A very useful resource for trustees can be found in the Charity Commissions’ guidance note – The essential trustee: what you need to know, what you need to do. Which provides useful, detailed guidance on charity trustees’ duties, liabilities and how to reduce the risk of personal liability. It is also recommended that trustees obtain bespoke advice and training to put them in the best position possible to ensure they are able to meet their obligations.
The Ashfords Charity Team provides training and advice lines to help charity trustees with their obligations, and arranges seminars and networking events to share best practice. The team can be contacted on 0800 0931 336 or by email on email@example.com should you wish to discuss how we might be able to help.