Posts tagged ‘Trusteeship’

Well it really depends on what you mean by paid.

Remuneration

your time is a valuable resourceIt is true that a Trustee can not be paid for the time and skills committed to assisting the charity.  This is to prevent conflicts of interest when a Trustees personal decisions are not necessarily in line with those of the charity, and ensures that the charity sector doesn’t ruin the trust it has built with the public with media stories of fat cat bonuses, like the banking sector are still trying to shrug off.

Expenses

California StreetA Trustee should not however, be out of pocket.  It is one thing to donate your time, thoughts and energy to the cause, but to be financially worse off as a result is recognised by the Sector, after all attracting highly skilled people to take on the time commitment and huge responsibility of Trusteeship is difficult enough.

It is therefore considered acceptable to reimburse such as travel to Trustees meetings and specifically identifiable telephone call charges.

It is imperative however that the governing document (usually a Memorandum and Articles of Association, a Trust Deed or a Constitution) allows this.  Many of these documents have not been revised since the origin of the charity and more often than not prohibit any payment of charity funds to Trustees.

If expenses are allowed then Trustees should be careful to ensure adequate controls have been designed and fully implemented so that their governance of charitable funds is not questioned.  Your auditor should be able to advise whether the systems in place constitute “adequate controls”.

Services

In the Charities Act 2011 which was implemented in phases between 2006 and 2011, it was acknowledged that in some circumstances it is perfectly logical and commercial for a Trustee to tender for work to be carried out for the charity.  For example, if a surveyor was a partner in a Chartered firm and a Trustee, it would be nonsense to engage the services of a different firm to offer advice regarding properties held, when the Trustee already knows the objectives of the charity, the opinions of the Trustees and the properties involved. He may even offer his professional services at a preferential rate.

Once again the Governing document may prohibit this, but assuming it doesn’t, the board must ensure that they are using charitable resources in the most effective manner and the Trustee in question must be removed from any decision making process in respect of his firm’s appointment.

Regulation

This is bound to be a focus point of Charity Commission scrutiny, so make sure you read the guidance on their website and liaise with your auditor before considering this.

It is also possible to obtain the Commission’s approval, which I would recommend if the amounts involved are substantial or relate to non-commercial circumstances such as compensation for loss of earning because the Trustee was required to attend a meeting.

The Commission also has the power to override the governing document, which may be useful if time does not allow for the document to be amended and approved.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

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History and culture has fuelled belief that Trustees can not be paid for their time, expertise or services rendered.  Whilst they should not be paid simply for acting as a Trustee, Chapter 9 of the Charities Act 2006 includes a statutory power that allows trustees and connected persons to be remunerated for goods and services they provide to the charity, subject to specific safeguards being in place to prevent abuse.

The biggest stumbling block is the governing document. 

As many charities were formed prior to the 2006 Act, standard clauses are often included in incorporation documents, constitutions or trust deeds that specifically prohibit trustee remuneration.  Obviously, this needs to be overcome before any further consideration can take place.  Amendments to governing documents are often complicated and time consuming due to their ‘public’ nature and may need to be approved by the Charity Commission.  Read guidance.

Safeguards

Assuming such a clause does not exist, the safeguards specifically mentioned by the 2006 Act are:

  • The trustees must demonstrate that they have consulted Charity Commission guidance and have decided that it would be in the charity’s best interest for the services to be provided by the trustee/connected person.
  • There must be a written agreement between the individual and the charity recording the terms of the arrangement and specifically the amount of remuneration agreed.  The individual being remunerated must not be involved in any decisions or other matters related to this agreement.
  • The amount of remuneration agreed to be paid by the Trustees must be reasonable for the level of service being provided.  In other words, there needs to be evidence that the Trustees are utilising resources in a commercial manner.  This is a key principle of Trusteeship.
  • Only a minority of Trustees can be remunerated in any form.  So if there is a small Board, take care.

A charity trustee should not be in a position where any personal interest may conflict with their role as a trustee.  They should not benefit directly or indirectly from their position whether through payment in money or benefits in kind.

A working example

A small charity has a part time bookkeeper who reports to a practicing accountant on the Board of Trustees. 

In order to qualify for a grant, the charity has been asked to put together a departmental cash flow forecast and some projected profit and loss accounts.  Obviously the person best placed to do this would be the Trustee as they understand the organisation and the requirements of the grant making body and have the relevant competancies, but they do not have the time.  They are in business full-time and offer their experience and personal time as a Trustee, for emotional motives. 

In the past, the Charity would have no choice but to engage an accountant to carry out this task, incurring professional fees, probably at full market rate as well as investing time to properly seek out, appoint and brief the professional.

The 2006 Act, acknowledges that it would make sense to engage the practice that their Trustee is involved with as this would be efficient and fees may well be negotiable.


In my view, this is a positive step towards making the 3rd sector more commercially aware, something I am passionate about.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.