Trustee responsibilities

Ever since the collapse of Kids Company in 2015 and the subsequent court case, trustees have needed to be more conscious of their duties and responsibilities to ensure that they stay on the right side of the law. The Charity Commission issued their official report in February 2022 criticising the trustees. The High Court did not disqualify the directors of Kids Company and the CEO Camila Batmanghelidjh won a right to a legal appeal on the Commission’s findings, but her ill health prevented her from doing so and she passed away at the beginning of this year.

In 2021, trustees of the Kids Company had to navigate their way through the view of the High Court, rather than the Charity Commission. The Judge viewed that trusteeship is proportional and it is perfectly correct for trustees to place reliance on information and reports provided by management in their decision making. Whereas the view of the Charity Commission is that Boards need to be responsible for all aspects of charity management and challenge information provided to them.

The issue I have always had with the Charity Commission approach is that it does not recognise that for larger more complex organisations, trustees are unable to fulfil their duties without a significant time commitment, review of information, and subsequent burden that is above and beyond the current governance structures in place. Most Boards meet quarterly and there is limited time available to Boards to deal with running an organisation. Volunteer trustees who are working full time may find the time requirements of such a role challenging if the Charity Commission view is followed in full. Also, it is a fine line to tread between enough information and challenge, versus interfering with the day to day.

So how can you fulfil your duties as trustees?

It’s your decision: charity trustees and decision making.

The Charity Commission guidance It’s your decision: charity trustees and decision making is a good starting place. It was last updated in June 2023 so holds the latest view on governance from the Charity Commission. It explains the “Trustees’ approach to decision making generally… when making significant or strategic decisions, such as those affecting the charity’s beneficiaries, assets, or future direction. The Charity Commission doesn’t expect trustees to follow them step-by-step for minor decisions”.

There are two key takeaways regarding decision making which are worth recognising in particular:

• “if delegating to staff or sub-committees, having clear and robust reporting procedures and lines of accountability in place. … Where trustees delegate decision making, they must always retain ultimate responsibility and accountability for all decisions that are made.”
• “record decisions properly, so there is no doubt about what was decided and why.”

Charity Commission cases turn into governance issues

In the recent past, large national charities have been criticised by the Charity Commission for governance failings which inadequately addressed appropriate oversight of their operations and structure. The regulatory cases send mixed messages.

Take the RSPCA; the Charity Commission held concerns over the size, skill, and terms of office of the Council. It was also suggested that members of the Council were too involved in day to day issues. The RNIB’s Board were criticised for their lack of robust oversight, concluding that “charity trustees must ensure that their corporate governance is fit for purpose to provide robust oversight of their charity’s operations and structure, taking into account the complexity, scale, nature and associated risks of its activities”. In Age UK the Board were criticised for inappropriate delegation on commercial arrangements which were undertaken in a trading subsidiary at Board level – thereby effectively requiring oversight and control of such commercial arrangements at the charity Board level, to ensure in the best interest of the charity and thereby effectively removing the delegation to the subsidiary Board.

There is a real tension for charity trustees between knowing ‘enough’ to be able to robustly challenge strategy, decision making, and activities, versus becoming too embroiled in the issues to be seen as interfering with day-to-day operations. For most charities they can be complex organisations, which cover many activities from fulfilling their charitable purpose, trading in subsidiaries to raise funds, running shops and retail perhaps, receiving grants and donations which may require due diligence and consideration to fundraising in various other ways. Charity Boards needs to know enough about all these factors to ensure there are no inadvertent breaches in governance. It is always very easy to criticise an organisation in hindsight. I would encourage charity trustees to think about risk and their risk registers to understand where their risk lies, understand where their monies come from, and how much oversight is needed in each of these areas, versus policies and delegated authorities to fully understanding the nature of the activities undertaken. If you cannot answer any of the above questions in sufficient detail to cover most of your income and expenditure, then perhaps the Board needs to take stock and delve into the detail.

Next steps

It is important that trustees consider how they manage and document their decision making, and the pertinent disclosures in the public domain on their governance structures with assurance over their internal control environments. As we are now in the New Year and looking at strategy, budgets, and forecasts, it is important that Boards reflect on what they know, and what they do not know- but should do, and have an action plan to rectify this.

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