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At the risk of straying into muddy, political waters, the recent resignation of the Health Secretary has highlighted issues relating to the conduct of those under public scrutiny. One such issue with implications for charity trustees is the perceived conflict of interest.

What is a conflict of interest for a charity trustee?

Charity trustees, like government ministers, are responsible for dealing with other peoples’ money. As such, their behaviour is highly regulated and carries an absolute duty to act in the best interests of your charity (or country). The basic premise is that a charity trustee will not be profiting, directly or indirectly, from their duties as a trustee. This seems simple enough but, sometimes, a conflict can arise when:

  • You, or someone connected to you, could benefit from a charity’s decision
  • Your duty to the charity competes with loyalty you also have elsewhere

It is important to bear in mind that a potential conflict of interest can arise even if the charity does not lose out as a result of the conflict. In fact, it may even do better than would otherwise have been the case. Anyone who has an actual or perceived link to a trustee is at least as much a source of such conflict as a family member.

What should trustees do to reduce the risk of conflicts of interest?

The first step for a charity trustee is to identify if a conflict exists. There is a legal requirement for trustees to declare such conflicts immediately that they become aware of them.

We would recommend:

  • A standing agenda point at the beginning of each meeting to remind trustees of responsibilities. This gives them an opportunity to declare the existence of any conflicts of interest. This is quite important where changes occur over time including personal relationships.
  • Keeping a register of interests so that everyone involved is aware of potential conflicts.
  • Providing guidance and training to trustees. This often features in our free charity newsletters, seminars and workshops.
  • If in doubt, seek advice.

What should trustees do if they identify a conflict?

Once you have spotted a potential conflict, you then need to identify and document how you will prevent it from affecting your decision-making. As with step 1, openness and honesty will be of utmost importance.

Our recommendations here would depend on the nature of the transaction, as some legal rules apply, and also the charity’s governing document. However, the minimum might be:

  • See if you can take an alternative approach that avoids the conflict
  • Ensure that the conflicted party does not take part in, or otherwise influence, discussions on the issue (or decisions thereon)
  • If in doubt, seek advice

Finally, as with all matters of importance to your charity, make sure that you keep a formal record. You can readily deal with this via a few additional pieces of information in your minutes.

We would recommend you record:

  • Details of the conflict
  • Who was affected
  • What was declared in advance
  • Details of anyone who withdrew from the discussion
  • An outline of the discussion
  • A conclusion as to how the trustees made the decision in the best interests of the charity
  • Details of any advice sought

The key issue when you are identifying, preventing and recording a conflict of interest is openness. 

If, as a charity trustee, you cannot deal with a conflict of interest in an open and transparent way, then the Charity Commission dictates that you should resign.

Thomas Westcott is committed to helping charity trustees be the best charity trustees they can be. If we can help your charity, please do not hesitate to contact us.

For further advice, please do not hesitate to contact me or your local Thomas Westcott office.