As many charity trustees may be aware, the week of 13 -17 November 2023 is the Charities Regulatory Authority’s “Charity Trustees’ Week” with an increased focus on the roles and responsibilities of charity trustees. With that in mind, in this briefing we are flagging a few key areas that charity trustees should bear in mind when considering their legal duties under Irish law. These duties can arise under the governing document (constitution) of the charity, the Charities Act, 2009 or under other legislation and common law. Charities that are incorporated as companies limited by guarantee also have obligations under the Companies Act, 2014 (as amended).
The Arthur Cox Charity Law Group has considerable experience acting for a broad range of Irish and international charities. Several of our Partners and Associates participate on the boards of charitable bodies operating at both national and local level – and we are therefore aware of many of the practical issues facing charities in diverse sectors, including trust, litigation, and governance matters.
To discuss any aspect of this briefing, please get in touch with Philip Smith or Sarah McCague of Arthur Cox’s Charity Law Group in the first instance.
Prepare and Plan
Charities are required to have certain policies and procedures in place that deal with areas such as data protection, fundraising, volunteers, finances, and inquiries into breaches of compliance. The Charities Regulatory Authority (the “CRA”) has created a Compliance Record Form which is used to outline and evidence the actions taken by a charity to adhere to the Charities Governance Code. Although charity trustees are not required to file this form with the CRA, the CRA may request a charity’s record form at any time. The Compliance Record Form should be updated annually, so the charity is in a position to readily respond to any such request. The form serves as a useful guide for trustees to identify and monitor key operational areas of their charity that can give rise to potential issues (such as conflicts of interest). This enables them to devise responses that can be put in place to address those issues (such as a code of conduct for trustees).
Review and Update Policies and Procedures
It is critical that safeguarding policies, procedures, and practices are made available to the public and are reviewed annually in order to ensure that these policies remain effective in response to serious incidents. The policies should clearly address how concerns may be raised and the procedures that follow, including the reporting of allegations to the relevant authorities. The policies should be updated regularly to reflect any changing statutory requirements and newly identified potential risks faced by a charity. The trustees should take steps to ensure that the charity’s staff and volunteers are familiar with the safeguarding policies and the importance of implementing them, thus encouraging good practice and accurate record-keeping within the charity.
Notify and Respond to Concerns
A trustee of a charity who is concerned about the charity, or who becomes aware of such a concern, should first raise this concern with their board. Past investigations by the CRA into non-compliant charities have highlighted inadequate action taken by the board to address compliance concerns raised about the charity. When a board becomes aware of any issues, it has a duty to act in a timely manner. Should the situation remain unresolved, the concerned trustee should then raise the concern with the CRA.
Take Appropriate Advice
Trustees have a duty in areas in which they are not expert to take appropriate advice to ensure the good and proper management of the charity. Once such advice is received, it must be followed and if it is not, the reasons for the actions taken by the board must be documented. Again, past investigations by the CRA into non-compliant charities have highlighted a repeated failure to follow appropriate advice.
Trustees may rely on the advice of employees, consultants, or advisors when putting appropriate arrangements or structures in place to manage the charity. However, trustees cannot turn a blind eye to potential issues. If they become aware of facts that could reasonably be regarded as indicating that a default has occurred, they must take appropriate remedial action.
Charity trustees should resort to legal advice where necessary to guarantee the best interests and viability of the charity. Taking professional advice where appropriate will minimise the risk of things going wrong. The multi-disciplinary Charity Law Group in Arthur Cox can support charity trustees by providing them with advice on any aspect of the charity’s affairs that may be giving rise to concern or on which they require professional opinion.
Implement Good Governance Practices
Practicing good governance will serve to provide an extra layer of protection to the trustees of a charity. Minor actions such as ensuring that the minutes of a meeting are recorded accurately, and requiring that key decisions are written down, reflect good practices that should be implemented by charity trustees.
Manage Conflicts
When things go wrong for charity trustees, the situation often involves non-compliance due to financial mismanagement or a failure to disclose a conflict of interest. At all times, a trustee must ensure that they are acting within the law and specifically in accordance with their fundamental duty of loyalty to the charity and its best interests. Once a trustee identifies an actual, potential, or perceived conflict of interest, this conflict must be entered into the charity’s register of interests and also raised with the board of trustees.
Conduct Risk Analysis
Charity trustees should implement a risk management system that identifies, evaluates, and manages possible risks facing the charity. Charities are encouraged to put a risk register in place, which necessitates discussion amongst the trustees to identify and record all potential risks facing the charity, and how they would manage that risk if the threat level escalated. A charity’s risk policy should explain how concerns can be raised, and how the trustees will respond to such concerns (including by reporting to the relevant authorities where appropriate).
Disclose Theft and Fraud
If, in the course of a trustee’s duties, they come into possession of information that provides them with reasonable grounds to believe that an offence under the Criminal Justice (Theft and Fraud Offences) Act 2001 has been or is being committed, that trustee has a duty to disclose this to the CRA via a report in writing outlining the particulars of the grounds upon which the concern was formed.
Prepare for CRA Enforcement Initiatives
In 2022, the CRA dealt with over 500 reported concerns, opened two statutory investigations into charities, and published one inspector’s report. In July 2023, the CRA announced that it is involved in a “targeted compliance and enforcement initiative in order to bring non-compliant charities into compliance”. The consequences of breaching a trustee’s legal obligations are serious. Charity trustees may be held personally liable for any loss or damage that the charity sustains as a result of their actions. In addition, the trustees of charitable trusts and unincorporated associations may be held personally liable for the debts of the organisation. If it becomes necessary for the trustee of a charity to defend against any action for loss or wrongdoing, it is crucial that they can demonstrate that they have taken all reasonable and practical steps to act in the best interests of the charity
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