It is my practice to monitor Charity Commission reports on their investigations to see if there are any lessons to be learned.

Most inquiries are started either by a lack of reporting or a direct complaint from the public and the last three months alone confirm this.

The following are the issues that have been/are being investigated over the last 3 months and whilst most would not be an issue for a well-run charity there are some that should be red flags to all charities:

• Failure to hold trustee elections
• Potential misuse of funds
• Acting as a trustee whilst disqualified
• Failure to manage debt levels
• Misconduct and mismanagement within the administration of a charity
• Conflicts of Interest and related party transactions
• Unauthorised trustee benefits
• Trustee conduct resulting from disputes
• Failure to hold trustee meetings
• False accounting

Failure to manage debt levels are on both sides of the Balance Sheet. It may be debts on a portfolio of rental properties that a charity relies on for its income on one side of the accounts. Alternatively, it may be borrowing relating to a capital project that the charity is failing to manage on the other side.

Whilst a charity may be seeking to protect a small business or a charity that they have as tenants who might be struggling, they also have a duty to protect the assets of their charity for the sake of the beneficiaries and must be mindful of that. Likewise, when they borrowed money to carry out a capital project, they did so in the full understanding that they should be able to manage the debt repayments and failure to do so is a failure of the trustees which must be mitigated ASAP.

Conflicts of Interest and Related Party Transactions are too often an obstacle that trustee’s trip over. I have seen far too many examples of failure to declare such conflicts and related party transactions that are clearly at arm’s length with no evidence of them being discussed or declared. THIS SHOULD NOT HAPPEN. If you have even a potential conflict this MUST be disclosed if only to confirm that it is not a conflict. If it is, you MUST recuse yourself from all participation in the agenda item. As far as related parties are concerned, they can be permitted PROVIDED the discussions are recorded demonstrating they are in the best interest of the charity even if they are immaterial. If they are material contracts, you MUST go through a competitive tender process.

Unauthorised trustee benefits should NEVER be permitted.

Finally, trustee disputes are not in the purview of the Charity Commission who say clearly that they are NOT mediators. However, it is the damage caused by such disputes that do potentially mean their involvement. Trustee disputes happen; they should not but they do so what course of action should you take. If you cannot resolve your differences as trustees, then you would be wise to call in some independent third party to mediate. Remember though that it is the charity that ultimately pays the price of independent third-party intervention so try and sort it out yourselves if you can before it becomes an issue for you.