Becoming a trustee for a charity is a great thing to do, but it’s also a significant commitment. We answer some commonly asked questions from new trustees, highlight key points to consider, and provide further guidance that’s available.
Being a trustee means that you’re part of the trustee board that makes decisions together to run a charity. Depending on the size of the charity, most of the day-to-day operational matters may be looked after by paid staff, but all significant decisions should be discussed at board level. Management should be overseen and challenged by the board, but also listened to and supported in their roles. The board may not be unanimous in its decisions but should work together in a professional and respectful manner to share thoughts and agree actions together.
What does a trustee do for a charity?
When a charity is established, its specific purpose is set out as part of its governing document and becomes a legal obligation. A charity cannot use resources on anything that is outside of these ‘charitable objects’.
One of the main duties of a trustee is ensuring your charity is carrying out actions in line with its specific charitable objects to support its intended beneficiaries. Trustees can do this by agreeing particular objectives which are in line with the charitable objects and give clear measurable targets to achieve. The detail of these objectives may change over time as circumstances change, but the underlying objects will not change (unless agreed with the appropriate authority such as the Charity Commission, but this is relatively rare).
A charity should not spend resources on anything that is not in line with its charitable objects, although this will include necessary support and administrative costs as well as direct expenditure. Ensure you’re clear about what the purpose of your charity is and bear this in mind for all decisions that need to be taken.
It’s also important that the charity is sufficiently active – it’s there for a purpose and should take actions to achieve this.
How do you manage your charity’s resources responsibly?
Balancing immediate needs of beneficiaries with longer term requirements can be one of the key challenges of being a trustee.
Budgets and forecasts should be regularly prepared and reviewed to ensure that the charity does not overcommit itself and run out of funds. At the same time, the charity should not hold back unnecessarily high amounts of funds that could be spent in line with the charity’s objects now.
Charities often receive ‘restricted funds’ – this is income that the donor has specified is to be spent towards a particular activity. It’s a legal requirement that these funds are ringfenced for the specified purposes only.
Trustees are also responsible for ensuring that the charity has appropriate policies and safeguards in place to minimise the risk of fraud or theft of resources.
As noted in the introduction above, depending on the size of the charity, some day-to-day decisions may be delegated to paid staff, who are then overseen by the board. Additionally, larger charities may have sub-committees, such as for financial matters, who are given specific “Terms of Reference” which delegate particular duties to them. The sub-committee must only act in accordance with the instructions and within the limitations given to it in these Terms of Reference and should report on significant matters during full board meetings.
When should you seek specialist advice?
Trustees are not expected to be specialists in all areas, although you may often have a wide range of skills and experience around the table.
What is expected of trustees is certain behaviours – to use reasonable care and skill and to act responsibly and honestly. This includes being transparent when you feel you don’t know something and may need to consult an expert.
Managing conflicts of interest
Conflicts of interest could be financial or loyalty conflicts. Board meetings should have a standard agenda item to declare any conflicts. A Register of Interests should be completed by all new trustees and updated with sufficient regularity. A Conflicts of Interest policy should be in place specifying whether you need to avoid conflicts altogether or if you are able to have safeguards in place to mitigate them.
Managing risk
Trustees should regularly consider the risks faced by their charity and plan for the management of those risks. The level of detail required will depend on factors such as the size and complexity of the charity but it’s likely that a risk register will be needed.
Charities that require an audit must provide details of the major risks that they have identified and the strategies they have in place to mitigate those risks within their trustees’ report.
Can trustees be held personally liable?
Yes, but it’s very rare. It’s possible for a trustee to be held personally liable for a financial loss suffered by the charity itself or by a third party if the charity cannot pay money it owes.
However, the law generally protects trustees as long as they have acted honestly, reasonably and not benefited personally from their decisions. If a trustee is found to have acted without due care, dishonestly or knowingly not in the best interests of the charity, then there is no legal protection.
Charity Commission guidance for trustees
The Charity Commission has a detailed overall guide, as well as ‘bite-size’ 5-minute guides on a variety of topics:
- The essential trustee: what you need to know, what you need to do (CC3) – GOV.UK (www.gov.uk)
- 5-minute guides for charity trustees – GOV.UK (www.gov.uk)
ICAEW support
The ICAEW offers free online training and support which is available to all:
How we can help
We provide training sessions for trustees, covering a variety of topics both in person and online. Recordings of recent webinars are available on our website.
If you’d like any further information and specific guidance on the areas discussed, please get in touch with Alexandra Momtahan.
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Senior Manager, Bristol
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