One of the most common causes of problems within charities is the poor management of conflicts of interest. A review of Charity Commission inquiry reports shows that many of the issues leading to regulatory action arise from conflicts that have not been identified, declared or appropriately managed.
The Charity Commission recently highlighted this issue in its blog post, Let’s talk about conflicts of interest in charities – Charity Commission
Conflicts of interest arise frequently in the charity sector. Examples may include situations involving potential personal benefit to trustees or their close family members, or where a trustee or senior member of staff also acts as a trustee, employee or adviser to another organisation.
In many cases, conflicts are unavoidable. The important issue is not whether conflicts exist, but whether they are recognised and managed properly.
Good practices include:
- Understanding conflicts of interest and their potential impact
Trustees and senior management should understand what constitutes a conflict and the risks these situations can create for the charity. - Having clear procedures for identifying and declaring conflicts
Many charities include a standing agenda item at board meetings for declarations of interest. It is also common practice to require annual declarations from trustees and senior management. - Managing conflicts appropriately once identified
The charity’s governing document may contain specific requirements. In many cases, the conflicted individual should not participate in discussions or decisions relating to the matter concerned. - Maintaining a formal conflicts of interest policy
A clear written policy helps ensure consistency and demonstrates good governance. - Keeping appropriate records
Declarations made, decisions taken and actions agreed should all be properly documented in meeting minutes and other records.
Failure to manage conflicts effectively can create significant risks for charities, including reputational damage, regulatory intervention by the Charity Commission, and in some cases trustees being required to reimburse the charity personally.
Effective management of conflicts of interest is therefore an essential aspect of charity governance and an important internal control for any organisation.
Contact Our Experts
