Tag: trustees

Charity Purposes and Rules

As a trustee, you must run your charity in a way that complies with your charity’s governing document and the law.

This includes making sure your charity achieves its purposes.

Every trustee is responsible for this. Even if certain tasks are done by individual trustees, employees or volunteers, all trustees are responsible.

Every charity has a governing document. It contains:

your charity’s aims or purposes (often referred to as its ‘objects’)
rules for how it must operate

Focus on your charity’s purposes

You must deliver only your charity’s purposes. Your charity’s funds can only be spent on supporting the delivery of these purposes.

Read the governing document. Make sure you understand:

what your charity is set up to achieve (its purposes)
who your charity is there to benefit (its beneficiaries)
what your charity can or cannot do to carry out its purposes (its powers)

Checking that your charity is furthering its purposes is something you will do all the time as a trustee.

Drifting into activities that your charity is not set up to do

This can happen if you do not focus on your charity’s purposes. For example, where the charity:

wants to deliver a new service, but trustees have not checked that this new work fits the charity’s purposes
has applied for a grant, which must be spent on activities that do not match the charity’s purposes

Using charity funds or resources on other purposes is very serious. Trustees may have to repay the charity from their own money.

Keep your charity’s purposes under review to ensure that they properly reflect what the charity does.

Payments To Charity Trustees: What The Rules Are

Pay a trustee to be a trustee

When you become a trustee, you volunteer your services and usually won’t receive payment for your work.

Generally, charities cannot pay their trustees for simply being a trustee. Some charities do pay their trustees – they can only do so because it’s allowed by their governing document, by the Charity Commission or by the courts.

Trustee expenses

The law entitles charity trustees to claim legitimate expenses while engaged on trustee business. No separate authority is needed in the charity’s governing document or from the Commission.

Expenses are for out-of-pocket payments trustees have to make in order to carry out their duties, for example:

travel to and from trustee meetings
overnight accommodation
postage, telephone calls and broadband time for charity work
childcare or care of other dependants while attending meetings

Your charity should have a written agreement setting out what is classed as an expense, plus how to claim and approve expenses.

Some types of payment are often confused with expenses, when they are actually trustee benefits which HMRC will consider can be taxed as income. They can only properly be paid out of charity funds if there is suitable authority for doing so.

The following are all examples of payments which are not expenses, and which the Commission might need to authorise:

compensation for loss of earnings whilst carrying out trustee business
allowances: for example, a personal clothing allowance
honoraria (small or token sums not intended to reflect the true value of the service provided)
payment for use of a trustee’s property (or part of it) for storage and use of charity equipment

Pay a trustee to provide goods or services to the charity

Trustees could be paid for:

work such as plumbing or painting and any associated materials such as paint or plumbing parts
providing specialist services, such as estate agency or computer consultancy
providing premises or facilities for occasional use, for example as a meeting room
administration or secretarial work
supplying stationery to the charity

Pay someone who is connected to the charity

If someone is connected to a trustee, they are known as a ‘connected person’. For example:

a spouse or partner
siblings
a brother- or sister-in-law
parents
business partner
businesses connected to trustees
If a connected person is to be paid or employed by the charity, the trustee or trustees they are connected to must not be involved in any part of the process.

Buy a leaving gift for a trustee

You may decide that it is appropriate to use the charity’s money to buy a small gift as a leaving or retiring present for a trustee.

Small gifts usually do not need the Commission’s authority, provided that:

the value of the gift is minimal
the trustees agree it’s in the charity’s best interest

When to get Commission consent

If your governing document doesn’t allow you to pay trustees, you may need to get the Commission’s consent before you:

employ a trustee, or a connected person
pay a trustee for serving as a trustee
pay a trustee’s expenses or replace lost income
pay a trustee or connected person for providing goods or services to the charity

More detailed guidance can be found here

Dave Goss, Trustee

Last week we were told the very sad news that, our trustee and friend, Dave Goss, had died.

When we formed DCAS and were looking for trustees, Dave was one of the first people to be approached and he had been a trustee with DCAS from the day we started in 2002. He embodied the classical role of trustee, the “critical friend.” We are indebted to Dave for asking those awkward questions which needed to be asked, as the moment that a charity starts thinking it knows what it’s doing, is the very moment it no longer does.

As well as a trustee for our Board, Dave was also Chief Officer at Derbyshire Advocacy Service. In an era of outstanding chief officers in the Derbyshire voluntary sector, we think that Dave was the best as he not only combined superb management skills but he also never lost sight of what really mattered, namely the people with learning difficulties who Dave supported.

Dave made a massive contribution to the voluntary sector throughout his life.

We send our condolences to his wife, family and friends.

Thanks Dave. We miss you!

Trustee Expenses and Payments

The concept of unpaid trusteeship has been one of the defining characteristics of the charitable sector, contributing greatly to public confidence in charities. This does not mean that a trustee can never receive any payment or benefit from his or her charity; there are sometimes good reasons why it can be in a charity’s interests to make a payment to a trustee. Trustee boards need, though, to minimise the risks to their charity’s reputation and operation.

Expenses are normally refunds by the charity of costs a trustee has had to meet personally (or which have been met on his or her behalf) in order to carry out trustee duties. In some cases, these expenses may be paid in advance. A refund of properly incurred expenses is not a trustee payment, nor does it count as any kind of personal benefit.

A charity can pay a trustee for the supply of any services over and above normal trustee duties. The decision to do this must be made by those trustees who will not benefit. They must decide that the service is required by the charity and agree it is in the charity’s best interests to make the payment and must comply with certain other conditions

More detailed information and guidance can be found in this document

Job Description For A Charity Treasurer

Clear role descriptions for trustees and specific officers on the trustee board will help your trustees understand their duties.

The Treasurer of a small community group or voluntary organisation may perform all duties concerned with dealing with money. So the treasurer may also, in effect, be the bookkeeper and finance manager. This job description will therefore need to be adapted according to the circumstances of your organisation.

Treasurer

Overall

Oversee the financial affairs of the organisation and ensure they are legal, constitutional and within accepted accounting practice.
Ensure proper records are kept and that effective financial procedures are in place.
Monitor and report on the financial health of the organisation.
Oversee the production of necessary financial reports/returns, accounts and audits.

Specifically

Liaise with relevant staff, committee members and/or volunteers to ensure the financial viability of the organisation.
Make fellow committee members aware of their financial obligations and take a lead in interpreting financial data to them.
Regularly report the financial position at committee meetings (balance sheet, cash flow, fundraising performance etc).
Oversee the production of an annual budget and propose its adoption at the last meeting of the previous financial year.
Ensure proper records are kept and that effective financial procedures and controls are in place, ie:
- Cheque signatories
- Purchasing limits
- Purchasing systems
- Petty cash/ float
- Salary payments
- Pensions
- PAYE and NI payments
- Others as appropriate
Appraising the financial viability of plans, proposals and feasibility studies.
Lead on appointing and liaising with auditors/an independent examiner.

If the Treasurer is expected to undertake all finance duties consider adding:

Undertake bookkeeping duties and/or oversee the finance volunteer ensuring posting and bookkeeping is kept up-to-date.
Maintain the petty cash system and regularly process petty cash claims.
Regularly carry out reconciliations/ oversee regular reconciliations by the finance volunteer.
Arrange payments to creditors as appropriate and arrange appropriate signatures on payments.
Make the necessary arrangements to collect payments from debtors and bank payments promptly.

Qualities

Knowledge and experience of current and fundraising finance practice relevant to voluntary and community organisations.
Knowledge of bookkeeping and financial management (as necessary).
Good financial analysis skills.
Ability to communicate clearly

As trustees, you share responsibility for governing your charity regardless of whether individual trustees have specific roles. For example, your charity may have a treasurer, but all the trustees are responsible for its assets and finances.

How To Convert a Community Interest Company to a CIO

If you are a Community Interest Company (CIC) you can apply to the Charity Commission to convert directly to a Charitable Incorporated Organisation (CIO).

Step 1: Prepare a conversion resolution

The directors of the CIC will need to produce a conversion resolution which confirms that the members of the CIC wish to convert the CIC into a CIO under the Charitable Incorporated Organisations (Conversion) Regulations which came into force on 1 September 2018.

Step 2: Adopt Charity Commission model CIO constitution

Adopt and complete one of the model CIO constitutions found here

Replace ‘CIC’ with ‘CIO’ in the name to reflect that the organisation has converted.

Section 8 of the model CIO constitution covers if members would be liable to contribute to the assets of the CIO if it is wound up.

If the amount each member would be liable for is more than £10, you must select option 2 to confirm:

the CIO’s members will be liable to contribute to its assets if it is wound up
the amount up to which they will be liable for

The amount you enter in section 2(i) must not be less than the amount up to which the CIC’s members were liable to contribute to the assets of the CIC if it were wound up.

If the amount each member of the CIC is liable to contribute to its assets if it winds up is £10 or less, you can select option 1.

Step 3: Prepare a resolution adopting the CIO constitution

Prepare a resolution adopting the proposed constitution of the CIO. The resolution must confirm that the members of the CIC have adopted the proposed constitution of the CIO.

Step 4: Apply for charitable status

To apply for charitable status as a CIO, you will need to apply to register as a charity and also submit:

the resolution of conversion of the CIC to a CIO
the proposed constitution of the CIO
the resolution of the CIC adopting the proposed constitution of the CIO
a completed Trustee Declaration Form

In the ‘Special Circumstances’ section of your application, write that you are a CIC wishing to apply for charitable status as a CIO. Tell us the name of the CIC.

More help can be found here

After you have applied

The Charity Commission will check that you can register as a charity.

If you can they will give Companies House what they need to confirm to the Regulator of Community Interest Companies that you wish to convert your CIC to a CIO.

Once approved, Companies House will cancel the registration of the CIC and the Charity Commission will then register the CIO as a charity and let the trustees know.

Developing A Reserves Policy

The following 3 questions are designed to help guide trustees of smaller charities through the issues that need to be considered when developing their reserves policy.

Question 1. Why might you need reserves for the charity to be effective?

The basis of a good reserves policy is thinking through exactly why you might need to hold back some funds as reserves. If you conclude that your charity does not need to hold any reserves, then you must explain that in your annual report.

Question 2. How much do you need in reserve?

The reserves level may be a target amount or a target range. Any financial risks you identify should influence the amount of reserves you target to hold and be explained in your reserves policy.

Question 3. Have you got any funds in reserve at the end of the year?

The final step is to compare what you might need in reserve with what you actually hold. Where the difference is small, no action may be needed.

Information about the reserves policy and the level of reserves held must be included in the trustees’ annual report.

More detailed information and advice can be found here in Annex 1

Finding New Trustees

How to find new trustees

Who to recruit

Recruit trustees who have the experience and skills your charity needs. They need to be interested in the charity’s work and be willing to give their time to help run it.

Being a trustee takes commitment. Don’t appoint trustees because of their status or position in the community alone – these people may be better as patrons.

How many trustees to recruit

Your charity’s governing document may say how many trustees you should have and how they are appointed.

Legal requirement: you must follow your governing document’s rules when recruiting trustees.

Aim for a minimum of three unconnected trustees with a good range of skills. You need enough trustees to govern the charity effectively. It’s also important to keep your board small enough to arrange meetings easily and allow effective discussion and decision making.

How to encourage people to apply

To attract a broader range of trustees – including young people – you could:

try recruitment methods other than word of mouth, such as social media, advertising or trustee recruitment websites
encourage people who already support your charity, for example as volunteers, to become trustees
approach local universities or colleges and their student unions

Remove any barriers that could stop someone from being a trustee, for example by:

keeping board papers (particularly financial information) short and easy to understand
translating documents or providing accessible formats
making it clear that trustees can claim reasonable expenses, including help with travel and childcare
holding meetings at venues that are accessible for people with disabilities
having meetings at times that don’t exclude people who are working or have caring responsibilities
giving everyone a chance to contribute to discussions at meetings

If you ask someone who benefits from the charity to become a trustee, you must manage potential conflicts of interest if they will continue to receive those benefits.

What the Charity Commission expects from trustees in its casework

Trustees or charity officers contact the Charity Commission for different reasons. These include applying to register a charity, updating the recorded details of a charity or using one of the electronic forms to apply for a service. When you contact the commission, it expects you to always:

prepare carefully – this includes reading relevant commission guidance, ensuring you have all the information you need before contacting the commission and being clear what it is you want or need from the commission
provide information which is true, complete and correct

When the Charity Commission contacts you, it needs to be confident that its regulatory concerns have been fully addressed. This means the commission expects you to:

fully cooperate with it
provide full, frank and honest answers to its questions
provide information or documents it has asked for by the date specified

This will help ensure the commission’s engagement with your charity is completed as soon as possible.

Sometimes the commission may decide to check some of the information you have given it with other people or organisations, or it may ask for evidence to prove what you are telling it is correct. This is standard practice.

If you cannot meet a deadline the commission has set, you must let it know immediately and before the deadline expires. You must also ensure that you answer the commission’s questions fully and honestly. This means you should not provide limited or partial responses.

If you:

do not cooperate with the commission
do not provide information the commission has requested, or
provide partial, inadequate or no response

the commission is likely to conclude that the regulatory concerns are not resolved or allayed. If you do not provide the information requested, or provide limited, partial or inadequate responses the commission will often consider this a regulatory concern in itself. This may result in it deciding to take stronger regulatory action.

The courts have made clear that they expect trustees to cooperate with the regulator.

The commission will consider non-cooperation as evidence of mismanagement or misconduct, which is a matter the commission takes seriously.

It is a criminal offence under section 60 of the Charities Act 2011 for anyone to knowingly or recklessly provide false or misleading information to the commission. This includes suppressing, concealing or destroying documents.

Charity Trustee – Declaration of Eligibility and Responsibility

Trustees of charities in England and Wales should complete and sign this form to confirm their eligibility to be a trustee, and confirm that they:

are willing and eligible to act as trustees
understand their charity’s purposes
have passed any checks required if the charity works with children or vulnerable people

Send this form when you apply to register your charity with the Charity Commission.

You need to:

print the form
fill in the organisation name and the total number of trustees
tick relevant boxes if the charity works with children or vulnerable people or has a corporate trustee
get all trustees to read the form and linked material and then sign and date the form
scan the completed form and save as a PDF file

You can then upload the form when you apply to register.

If your charity has more trustees, print another declaration form for the additional trustees to sign.