As a trustee for a charity, you play a key role in how money will be managed.
Whether you’re the sole trustee to the charity or you have co-trustees, the responsibilities you have can be complex and onerous, especially if you’re not fully informed as to what they actually involve.
Under guidelines published by the government, there are three key, legal responsibilities that charity trustees must carry out. These are to:
- Act in your charity’s best interests
- Manage your charity’s resources responsibly
- Act with reasonable care and skill.
However, these can seem like somewhat vague instructions if you aren’t aware of the specifics involved with each one.
So, here are details of these key responsibilities that you’ll need to manage as the trustee to a charity.
1. Acting in your charity’s best interests
To begin with, let’s consider what it means to act in your charity’s best interests.
This is a broad responsibility that involves:
- Making decisions that enable the charity to carry out its purpose, in both the long and short term
- Avoiding conflicts of interest, both for you and the charity
- Avoiding mistakes, and rectifying errors that do occur.
As you can see, protecting the charity’s interests encompasses a wide range of duties. It could involve everything from making expense payments to your co-trustees, to the way in which you manage investments for the trust.
A good example of where this can go wrong is in not carefully reviewing investments to make sure that they’re appropriate for your charity.
One high-profile case of this came in 2013, when it was revealed that the Church of England held up to £10 million in armament shares through General Electric (GE).
At the time, GE was in the top 20 firms in the world for defence sales, a conflict of interest between the investment itself and the Church’s fundamental principles.
You’ll need to carefully consider details such as underlying assets in investments to ensure that you’re always acting in the charity’s best interests, both now and for the future.
2. Managing your charity’s resources responsibly
Responsibly managing resources boils down to the financial controls you implement to successfully manage money and assets, and how you balance risk among them.
This could include:
- Managing risk in all areas, wherever it may arise
- Careful and judicious budgeting
- Management of funds, assets, and property, and keeping these safe
- Procuring funds the charity needs, whether that’s through fundraising, trading, or investing.
Largely, these responsibilities are fairly self-explanatory, other than risk. Risk is a somewhat broad-reaching category that could mean many things.
It may refer to the trustee’s responsibility to select a diversified range of assets when investing, so that the trust is not overly exposed in a particular area.
Equally, it could extend to not taking enough risk with available funds. For example, if you held too much of the trust’s funds in cash, inflation could reduce its spending power over time.
In the long term, this may prevent the charity from reaching its financial goals if you leave too much cash to stagnate in savings.
It could even involve your approach to tax, perhaps not considering higher-risk, tax-efficient investments that could provide returns the charity needs, while also reducing its tax bill.
It is your job to ensure that money is appropriately handled in every capacity.
3. Acting with reasonable care and skill
Perhaps the most important responsibility you have of all is to act with reasonable care and skill. Otherwise, you could put the charity in all sorts of financial jeopardy if you don’t take adequate care in your role.
This could involve:
- Using your own skills and experience to inform your decisions
- Taking action when things go wrong to solve mistakes
- Seeking professional advice when you need to.
Taking advice is an especially crucial part of acting with reasonable care and skill.
From buying or selling land, to creating new contracts or considering legal action, it is your responsibility to seek professional advice when making complex decisions.
In particular, it’s your responsibility to take advice over your investment strategy to ensure that it’s appropriate and balanced for the charity’s needs.
If you don’t do your due diligence in selecting investments, you may find yourself on the receiving end of complaints when you don’t achieve the returns the charity expects you to generate.
There’s no specified time frame for when you need to seek advice. But, realistically, it’s likely to be a prudent decision to speak to an experienced professional at least once a year, with more regular meetings throughout those 12 months on any complicated matters.
Take professional advice from Rosebridge
If you’d like a professional to help you with the responsibilities you have as a trustee, please speak to us at Rosebridge.
We’re experts in helping trustees like you to manage assets on behalf of charities. This ensures that you successfully act with reasonable care and skill, in your charity’s best interests, and use your resources responsibly.
Email firstname.lastname@example.org or call 01204 300010 to find out how we can help you.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.