Regulator reminds trustees to only act in the best interests of their charity

Trustees have been reminded of their legal duty to act only in the best interests of their charity, and the regulator’s expectation that conflicts of interest are dealt with effectively.

In a report on an operational compliance case into animal charity Tag Pet Rescue, the Charity Commission has said trustees must ensure they do not put themselves in a position where their personal interests clash with their duties.

The commission got involved after complaints alleging unauthorised payments were being made to trustees of the charity. It was later determined the payments were unauthorised as the charity’s governing document only provided for one paid trustee, but the payments were made in good faith and the charity had benefitted from them.

“Making payments to a trustee, without proper authority, is a breach of trust and could result in payments having to be repaid to the charity by the recipient trustee,” the commission said. “Where we are satisfied that the payments were made in good faith in the interests of the charity, and that the charity has benefitted from making the payments, then we will not normally expect the trustees to seek repayment of the unauthorised benefit.”

“All trustees have a legal duty to only act in the best interests of their charity. We expect trustees to identify and address effectively any conflicts of interest that affect the trustees or their charity, taking the appropriate steps in line with our guidance”.

Payments had been made to Tag Pet Rescue’s founders, who had previously set up and run the charity on a voluntary basis but faced increasing demands on their time as the charity grew.

The trustees decided to continue to pay two of the board as employees after the charity was registered in 2006. The two trustees receiving payment were not involved in the decision, the commission said, and pay was set with consideration to comparable roles elsewhere.

The commission decided not to seek repayment, but issued an action plan requiring the independent trustees’ to consider whether it is in the charity’s interest to seek repayment. If it was decided the payments should continue, the governing document would need to be changed.

Trustees were also directed to put a conflict of interest policy in place.

“The action plan was issued in July and by the end of August the trustees had fully complied,” the regulator said. “They concluded that the payments to the trustees had benefitted the charity, amended the governing document to give the trustees the power to employ two of the board and had shared with us a copy of their conflict of interest policy.”

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