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07/12/2015

Charities: The Balance Between Trustee and CEO

Earlier this year, the Charity Commission issued a report of regulatory compliance following a dispute involving the Air Ambulance Service which highlighted the difficulty in finding a balance between the role of the trustees and that of the CEO.

A series of events led to the investigation, but one of the main causes for concern was the fact that the charity had held a fundraising event that resulted in losses of around £111,000 to the charity.

In addition, the chair of trustees, without agreement from all trustees, had misapplied charity funds by authorising a £27,000 loan to the chief executive officer. Occasionally, it happens that a charity has to take an emergency decision, and provided that they are authorised to do this, it is not a problem. However, these decisions should then be reviewed by the rest of the trustees and, if appropriate, ratified by them, at the earliest opportunity. Sadly, this was not the case in the Air Ambulance Service.

On the facts of this case, the Commission found that the trustees had not exercised sufficient control over the CEO and were over-reliant on them. This is a common problem as the CEO will have day to day knowledge of the charity whilst the trustees may only meet sporadically and base their decisions solely on information provided by the CEO.

This report should act as a reminder to trustees that they, and only they, are collectively responsible for the decisions made about the running of the charity. In order to do this effectively, they should be aware of and monitor on an ongoing basis, the risks to the charity and have property policies in place to assess these.

If you have questions about you governing documents, our expert Not For Profit team https://www.morrlaw.com/not-for-profit/


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