What Are The Obligations Of Charity Trustees?
Charity trustees are responsible for overseeing the running of a charitable organisation. Ultimately, they’re responsible for the success or failure of the charity in their charge.
In order to be successful in their role, charity trustees have a number of obligations that they must fulfil as part of their appointment. These include moral and ethical obligations, as well as legal obligations.
In this article, the team at Irwin Insolvency sets out and explains the most important obligations of charity trustees. Keep reading to find out more about these duties and responsibilities.
Who Are A Charity’s Trustees?
A charity’s trustees have overall responsibility for the charity’s successes and failures. Government guidance suggests that a charitable organisation should have at least three trustees, but in practice, a charity often has far more than this.
The trustees are collectively known as the trustee board, and they are generally selected for their skills, experience, knowledge and desire to help the charitable organisation in question. In addition, there are several legal and personal requirements that a trustee must fulfil, such as not previously having been made bankrupt and being free of criminal convictions.
The charity trustees hold trustee meetings in order to make decisions on behalf of the charity and, as a board, they must fulfil the obligations they’re responsible for.
The Six Obligations of Charity Trustees
The overriding obligation of charity trustees is to ensure that the charity’s objectives are met. This depends on the aims of the charity in question. The tasks that charity trustees need to accomplish can include everything from hitting fundraising targets to opening projects in new locations.
But while specific tasks and objectives differ greatly from one charity to the next (a charity for the homeless will be run very differently from a charity that aims to eradicate a particular illness, for example), there are six major obligations that every charity trustee needs to fulfil.
These six major obligations are suggested by the UK’s Charity Commission and are designed to help charity trustees be successful in their appointment. The six obligations or duties suggested by the Charity Commission are:
- Ensure your charity is carrying out its purposes for the public benefit
- Comply with your charity’s governing document and the law
- Act in your charity’s best interests
- Manage your charity’s resources responsibly
- Act with reasonable care and skill
- Ensure your charity is accountable
Let’s take a look at each of the six major obligations of charity trustees in more detail, to see what each responsibility entails.
1. Ensure Your Charity Is Carrying Out Its Purposes for the Public Benefit
A charity is set up and incorporated in order to fulfil a specific function or to pursue specific aims that are in the wider publics’ best interests. This could be tackling homelessness, advancing cures for cancer or helping refugees.
Trustees are therefore obliged to ensure that the charity is only pursuing its stated aims and is being run with the public interest at the centre of all its operations. As part of this, a trustee must fully understand their charity’s aims and know exactly what the benefit of the charity is for the wider community.
2. Comply With Your Charity’s Governing Document and the Law
Every charity has a governing document that sets out the organisation’s rules and objectives. It’s the job of the charity trustees to ensure that everyone working with or representing the charity follows the rules and regulations set out in the governing document.
In addition to these in-house rules, charity trustees must ensure that the charity is being run legally and meeting all of its legal obligations. This includes filing accounts on time, compiling annual reports, and following employment laws.
3. Act in Your Charity’s Best Interests
Charity trustees are obliged to always act in the best interests of the charity they are appointed to oversee.
This obligation has broad connotations, but generally speaking it means that a trustee can only make decisions that (to the best of their knowledge) stand to benefit the charity and progress its aims.
Charity trustees must make decisions based on expert advice, they must make decisions that are fiscally responsible, and decisions that meet both short and long-term needs.
4. Manage Your Charity’s Resources Responsibly
Importantly, a charity trustee is obliged to manage their organisation’s resources as responsibly as possible.
This means making sound financial decisions based on expert advice and real-time data. It means borrowing money responsibly, paying debts, and attempting at all times to avoid insolvency.
Charity trustees are obliged to only use charitable resources in the best interests of the charity, and to ensure resources aren’t squandered, lost or stolen.
5. Act With Reasonable Care and Skill
Trustees are responsible for carrying out their duties and obligations with as much due care and as much skill as they are able to, at all times throughout their appointment.
In practice, this means making measured decisions based on the best possible advice, utilising personal skill sets, experience and knowledge for the best interests of the charity, and where necessary learning new skills or gaining qualifications that can help with decision making.
6. Ensure Your Charity Is Accountable
One of the most important obligations of charity trustees is ensuring that the charity in their trust is held to account. Charities need transparency, and trustees have to be able to prove to their benefactors, to the public and to the government that they are doing everything within their power to run the charity legally and responsibly.
As part of this obligation, charity trustees must keep accurate financial records, they must conduct audits when required, and they must be able to justify all the decisions made on behalf of the charity. There must be a clear chain of command that allows volunteers, staff and the trustees to be held accountable for their decisions and actions, too.
Contact Irwin Insolvency for Your Free Consultation
With decades of experience offering UK charities financial services, business advice and independent auditing, our team of licensed insolvency practitioners can offer impartial expertise that can help your charity through tough times.