​Trustees Behaving Badly!

​Trustees Behaving Badly!

There has been a lot of recent media coverage about charities and situations where the behaviour and decision making of trustees has been criticised.

A recent report from the Charity Commission on the Catalyst Trust was particularly shocking and is important reading for trustees of all charities. Following the inquiry of the Charity Commission the charity was dissolved but not after the Charity Commission used its powers to direct the trustees to prepare the charity's accounts for previous years which had not been prepared on an annual basis and also removed the principal trustee as a trustee as a consequence of which the individual is now permanently disqualified from acting as a charity trustee. The Charity Commission used the report to reiterate the responsibilities of trustees. This was a charity where there was a "dominant trustee" (the trustee eventually removed by the Charity Commission) and the other trustees were not involved in running the charity. It was primarily managed and administered by the dominant trustee and the trustee body was found not to have made collective or adequately informed decisions in respect of the charity's management with key decisions being made by the dominant trustee. No records were kept either.

There were issues regarding financial irregularities and the failure to manage conflicts of interest. The charity invested funds in a number of different companies in which the dominant trustee had either an interest or a personal connection. Whilst the trustees claimed that these investments were made for the eventual benefit of the charity the inquiry found no evidence that the investments resulted in any tangible benefits to the charity at all.

When questioned about whether the charity had a conflict of interest policy the dominant trustee stated the charity did not have a policy because it had not identified any conflicts of interest! The Commission concluded that this demonstrated a complete failure by the trustees to both understand the concept of the management of conflicts of interest and to avoid putting themselves in a position where their duty to the charity conflicted with any personal interests or loyalty to any other personal body. The inquiry found that the dominant trustee repeatedly engaged in decisions regarding loans and investments where they were conflicted but the other trustees failed to fulfil their duty to identify and manage those conflicted situations.

This is a salutary lesson to all trustees that the nature of their role means that they should not just leave others to make decisions even if they are faced with trustees who have a strong and dominant character. All trustees are responsible for the running of the charity. All trustees are responsible for managing conflicts of interest. All trustees are responsible for administration, governance and management of the charity. So all trustees need to be fully aware of their responsibilities and duties.

At the same time as the report on the Charity Commission inquiry was published news was also circulating about the continuing problems faced by the RSPCA. In particular it has been suggested that about £1 million of the charity's funds have been used in recent years on the purchase, conversion and running of a small cattery close to the home of the Chair of the charity and benefitting the family of the Chair.

It is vital for trustees of all charities to be completely aware of their responsibilities and duties. The extent of those responsibilities and the day to day action that they take will depend upon the size of the charity. The smaller the charity the more the approach will need to be "hands on" with charity trustees often running the charity on a day to day basis. With medium to large sized charities the management structure will be different with some functions delegated to particular trustees or employees. What is essential though is that every trustee knows what their own charity's structure is and where they fit within that.

Commentary by Neale Grearson, Head of Clapham & Collinge Charity Department.

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