There are many reasons why you might like to become a trustee of a charity: positive support for a good cause, putting a particular skill set or experience to good use, or remaining active in the community.
Whatever your motivation, you need to be aware that being a trustee is a significant legal responsibility, shared with your fellow trustees, and you must understand your obligations before volunteering. The most important document you need as a trustee is the charity’s governing document which should contain all the information you need to understand how the charity is run and what it has been set up to do.
The post of trustee is almost always voluntary (with reimbursement of reasonable expenses) and you need to ensure that you have time to spare to undertake your duties properly, not least as trustees are liable for the decisions they make. There is a detailed guide on the responsibilities and duties of charity trustees on the government website www.gov.uk (under the aegis of the Charity Commission) but this guide aims to distil the essential points for you.
Are you eligible to be a Trustee?
- First, check that you are a trustee. If you are a member of the body which governs the charity (and this will be detailed in the charity’s governing document) then you are a trustee.
- You need to be at least 16 to be a trustee of a charitable company or charitable incorporated organisation (CIO) or 18 to be a trustee of any other type of charity.
- You cannot be a trustee if you have been disqualified under the Charities Act. This includes being disqualified as a company director; an undischarged bankrupt; having an unspent conviction for fraud; or if you have been dismissed as a trustee by the Charity Commission because of misconduct or mismanagement.
- Although being a trustee of a charity which works with children and vulnerable adults is not a ‘regulated activity’ (that would apply to those in direct contact with children and vulnerable adults) it would be unwise to apply to be a trustee if you have been barred by the Disclosure and Barring Service (DBS). At the very least, such an action could cause the charity untold reputational damage.
- The rules for appointing new trustees should be laid out in the charity’s governing document. If the governing document does not cover trustee appointments then the relevant legal provisions come into play - which will depend on whether or not the charity is incorporated or unincorporated [link to relevant article on website].
- Charities looking to recruit trustees should consider what skills and experience they need to fill any gaps; whether the proposed trustees are eligible and whether they are likely to face any serious conflicts of interest.
Does your charity pass the Public Benefit Test?
- Make sure that you understand the purpose of the charity, who (or what) it is intended to benefit (and how) and any restrictions or specific criteria that may prevail.
- All charities must be for the ‘public benefit’ i.e. their purpose must be designed to benefit something or somebody, and it must benefit the public (or a sufficient section of the public).
- You must understand how your charity carries out its purpose for the public benefit.
- You and your fellow trustees are responsible for planning how your charity will carry out its purposes.
- To change your charity’s objects in the governing document, for instance to update its purposes in order to pass the public benefit test, you need permission from the Charity Commission to do so and you need legal advice. The governing document is a legal document and any changes must be legally correct.
Do you comply with your charity’s governing document?
- Make sure you have a copy of the governing document and read it. You will need to refer to it and review it from time to time to ensure that it still accurately documents what the charity does.
- You need to understand the constitutional structure of your charity so that you know if needs to be registered with the Charity Commission or if it is exempt. This will dictate its financial reporting requirements.
- If your charity is registered, make sure that there is a statement to that effect on all fund raising documents [link to advertising regs for charities on website].
- If the charity employs people, rents or owns property, operates vehicles or other equipment there will be various pieces of legislation with which the charity needs to comply. As a trustee you do not need to be a legal expert but you are expected to know if your charity complies with the relevant legislation.
Are you acting in your charity’s best interest?
- Trustees must only ever consider what actions and decisions are best for the charity to enable it to carry out its purposes. The personal interests of employees, other trustees, beneficiaries or supporters are not relevant.
- Trustees must take decisions regarding the future of the charity responsibly which means being informed about the issue(s) at stake, acting in good faith and acting within your powers. Making a record of how a significant or difficult decision was reached is advisable.
- It is important to avoid any conflicts of interest whereby either you or someone connected to you (for instance a family member or employer) gains financially from your position as trustee of the charity.
Are you managing your charity’s resources responsibly?
- As a trustee you are required to act ‘responsibly, reasonably and honestly’ and exercise sound judgment. This includes making sure that the charity’s assets are used correctly; that the charity is not financially overstretched either in spending or borrowing terms; and that risk is managed appropriately.
- Most charities, like most organisations, face a degree of risk which tends to increase in direct proportion to its size and activities. The charity should have a risk policy setting out how potential risks, such as fraud, should be evaluated and mitigated.
- Ensure that the charity has sufficiently robust financial controls in place, not only to manage fraud-related risk but also to ensure that the charity can meet its financial obligations.
- Trustees need to review the charity’s fund raising plans to ensure that an appropriate and manageable strategy is in place.
- If your charity owns or leases land and / or buildings, you will be responsible for the way in which it is managed. It is likely that you will need professional advice when making decisions about buying, selling, leasing or mortgaging property.
- If the charity employs people, trustees need to ensure that the correct employment procedures and policies are in place for both paid employees and volunteers.
Are you acting with reasonable care?
- Your experience will dictate the extent of ‘reasonable care’ you can be expected to take. The Trustee Act 2000 expects trustees to ‘exercise such care and skill as is reasonable in the circumstances’. What is reasonable depends on the skill set of the individual trustee – for instance, an accountant will be expected to know more about financial controls than a non-accountant.
- Take professional advice when necessary – this will generally be for complex matters such as buying and selling land, or negotiating complicated contracts.
- Trustees need to take appropriate action if something goes wrong. This may include a damage limitation PR exercise and, depending on the seriousness of the incident, it may involve contacting the Charity Commission, the police or other relevant authority.
Is your charity accountable?
- You need to be sure that your charity is complying with the relevant accounting requirements and is able to produce the most recent set of accounts on request. Registered charities also need to provide the Charity Commission with relevant financial information depending on their size.
- Being accountable to your beneficiaries, supporters and funders is also important – their input will help to inform your decisions as trustees.
- Although delegation within the trustee body to form sub-committees to deal with specific aspects is perfectly acceptable, trustees cannot delegate their overall responsibility for ensuring that the charity, as a whole, is well managed in accordance with its purposes.
Reducing the risk of liability
- Trustees can be held liable for any financial loss caused by them acting dishonestly or irresponsibly. Charities or their trustees can be held liable for third party claims such as breaches of an employee’s contract and failure to pay for goods or services.
- Trustees can minimise their risk of liability by understanding their responsibilities, acting honestly and reasonably and taking professional advice when needed.
Being a trustee should be a rewarding experience. However, as trustees are ultimately responsible for the efficient management of the charity and its capability to deliver its objectives it is crucial that they understand exactly what that responsibility entails. The starting point for any trustee is to familiarise themselves with the governing document which sets out the charity’s legal structure, its objectives, who (or what) it is intended to help and how it meets the public benefit test. Beyond that, trustees must act in the best interests of the charity, applying common sense and good judgment.