15th August, 2016

This month Tim Larden, Managing Director of one of our partners Ladbrook Insurance, has written a blog post on the responsibilities of trustees. 

Having an engaged and capable management board is a tremendous asset to any charity. The skill, personal networks and passion that trustees can bring can act as a real driving force for the organisation.

While trustees play an enormous role in the success of the organisation, they also carry personal responsibilities. The obligations carried by individuals on management committees can be under-estimated, or at times, entirely misunderstood.

There are six main duties that cover the individual responsibilities; you can read the full Charity Commission guidance here. In short, a trustee needs to:

  1. Make sure that the organisation acts consistently with it’s stated aims
  2. Ensure the organisation acts in accordance with it’s own rules and the law
  3. Act in the best interests of their organisation
  4. Manage the organisations resources appropriately
  5. Act with a reasonable degree of care and skill
  6. Guarantee accountability for the charity

Within these six duties, there are areas in which personal risk for the trustee exists. If a committee member is negligent in discharging these duties, they might find that they come under investigation themselves. Of course, such cases are rare and the huge majority of trustees act reasonably, even in organisations where things have gone wrong.

However, areas of particular risk (and therefore duties to consider carefully) would include the fourth duty, under which prudent financial management is vital. In the worst cases of charities that go bust, creditors may pursue trustees and their private assets, if they have not acted reasonably in their management of the charity resources. In short, the financial management of the organisation is not just the responsibility of a finance officer or a treasurer, all trustees need to scrutinise financial operations.

The fifth duty is particularly open. If something goes wrong at a charity, the committee of trustees might find the finger of blame pointing at them. This makes the wider general scrutiny that they bring to bear on the charities activities very important.

The Charity Commission is increasingly active and since 2012, the Information Commissioners Office has been taking action and issuing fines against charities too. This creates an environment in which it is essential to stay on top of governance issues that affect your charity.

Recently, I ran an ‘Introduction to Risk Management’ course with a number of Nova members where we discussed how the culture of an organisation effects it’s approach to risk and looked at a basic risk measurement and management tool. Given the individual burden that a trustee carries, it is hugely important to be alert to the things that can go wrong and to consider the appropriate controls. The examples that Nova members shared on the day were fascinating and one emerging theme was that often, when things have gone wrong, it was not a total surprise to the people within an organisation.

As well as risk management, a further consideration trustees and charities might consider is purchasing Trustee Liability Insurance. While our advice would vary from organisation to organisation, it is likely that this cover is more important if you are unincorporated, where civil action against individual trustees is not protected by a wider organisational umbrella.

Insurance does not dismiss the six duties listed above and it will never cover the most severe examples of negligence which might border on the deliberate. In our experience, one of the most useful aspects of cover is the initial legal support at the outset when defending an allegation. More information about trustee’s indemnity insurance is available on the Ladbrook website, including wider guidance notes. Although claims are very rare indeed, the guidance notes provide some examples of genuine prior claims.

A great trustee is a tremendous asset to a charity. Acting as a trustee can be demanding but is equally highly rewarding. Being aware of the responsibilities, playing an appropriately significant role in organisational risk management and seeking the right support will ensure that trustees continue to benefit from the experience and that charities continue to benefit from their input. 

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