In whose interest?

Kathy Faulks discusses the revised Charity Commission guidance on conflict of interest for charity trustees.

Picture of people wearing hats

I've just received an update from the Charity Commission with their revised guidance on conflict of interest - take a look at the guide: Conflicts of interest: 
a guide for charity trustees
(pdf)

The simple truth of the matter is that a charity is here to carry out its charitable purposes for the benefit of the public. Anything or anyone that gets in the way of that is a conflict of  interest. The Charity Commission defines conflict of interest thus: “A conflict of interest is any situation in which a trustee’s personal interests or loyalties could, or could be seen to, prevent them from making a decision only in the best interests of the charity.”

You may recall that in my last blog I mentioned “connected persons” and this also applies to conflict of interest.  For a definitions of connected persons please refer to my blog: It’s a personal thing.

Three Steps

The Charity Commission recommends that trustees should use three steps to deal with conflicts of interest:

Step 1
Identify conflicts of interest

  • Have a conflict of interest policy.
  • Keep a register of interests.
  • Query potential conflicts of interest with prospective trustees.
  • Identify conflicts of loyalty.

Step 2
Prevent the conflict of interest affecting the decision making process

  • The Charity Commission expects trustees to have a standard agenda item at the beginning of each trustee meeting to declare any actual or potential conflicts of interest.
  • The trustees should consider whether serious conflict of interest should be removed. Examples of this are given in the Charity Commission Guidance.
  • If the trustees decide not to remove the conflict of interest then they need to consider a way forward to make their decision only in the best interest of the charity. For example, “where trustees are using the power in the Charities Act, which allows for the payment of trustees for the provision of services to the charity, the decision to do this must only be made by those trustees who will not benefit”.
  • Ask the Charity Commission for authorisation if most or all of the trustees share the conflict of interest.

Step 3
Record the conflict of interest

  • Keep a written record (the guidance tells you what the record should contain).
  • Disclose payments or benefits in annual accounts.

Read the guidance!

I strongly recommend that all trustees read the, very important, Conflict of Interest guidance (pdf) from the Charity Commission.

You cannot afford to get this wrong.

Where trustees don’t identify or properly respond to a conflict of interest, there can be serious consequences for the affected trustee, the charity, and public trust and confidence in charities generally.”  Charity Commission.

Please note also that Annex B of the guidance contains the legal situation for charitable companies and charitable incorporated organisations (CIOs) in respect of conflict of interest.

To bring this to an end on a positive note the Charity Commission also says:

Trustees’ personal and professional connections can bring benefits to the work of a charity and they often form part of the reason why an individual has been asked to join the trustee body. However, they can give rise to conflicts if interest, to which the trustees must respond effectively. The existence of a conflict of interest does not reflect on the integrity of the affected trustee, so long as it is properly addressed.”

Charity Commission

If your charity needs a conflict of interest  policy or if you are a trustee and want to discuss particular examples in confidence, then please get in touch with me on kathy.faulks@val.org.uk or 0113 297 7920. 

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