Running a Charity: Governing documents

The Charity Commission has recently concluded a number of investigations into the apparent mismanagement of charities. On occasion, the charities in question were carrying out worthwhile and charitable functions. Behind the scenes, however, the behaviour of the trustees called into question the validity of the charitable acts being carried out.

For example, in the case of the Jalalabad Association, the charity failed to submit any accounts for 5 years. When an investigation was started by the Commission, they found:

• some trustees had not read the charity’s constitution;
• the charity had an insufficient number of trustees according to its constitution;
• three trustees had been in post since the charity was founded, without ever standing for re-election (in breach of the constitution);
• little evidence of the charity’s income or expenditure; and
• the charity’s income was most by way of cash donations, with no formal accounting.

In the case of the Christ Embassy, the Commission investigated a number of issues including:

• grants made to a number of unidentified entities and certain organisations related to existing trustees;
• the administration, governance and management of the charity and the management of conflicts of interest; and
• whether or not the trustees had complied with and fulfilled their duties and responsibilities as trustees under charity law.

As an example, between 2009-2011, the charity made payments amounting to £1,281,666 to Loveworld Television Ministry. A trustee was the sole shareholder of LTM.

Along with investigations into the Darren Wright Foundation, Yateley Industries for the Disabled, and Kick It Out, these cases show that the Commission is taking a proactive approach to its regulation of charities.

Are you running your charity in accordance with its governing documents?

Trustees of a charity must know the governing framework of the charity for which they are responsible. They must act in accordance with both the law and the charity’s governing document. Failing to act in accordance with the charity’s governing documents can mean decisions made by the trustees are unenforceable or invalid. Potentially, this can create personal liability to the trustees in question.

If you have any doubts about the way in which your charity is being operated, please contact me on 01206 217366 or email [email protected].

I am based in our Colchester office and can also offer guidance as to your responsibilities as trustees of a charity.