NEW DEAL FOR COMMUNITIES
'NDCs' & PAYMENT OF CHARITY TRUSTEES
Introduction
The need to put in place a successful succession strategy is essential for NDCs that wish to continue their work in their particular area. Government guidance on succession planning for NDCs highlights three clear aims for the development of any NDCs’ successor body, that is: to demonstrate how the improvements made within the NDC area will be sustained beyond Government funding and into the long term (at least 5-10 years); to ensure assets generated by the NDC grant are safeguarded to continue to benefit the NDC area residents into the long term; and to be financially viable.
The NDC succession guidance identifies the types of organisations that are acceptable to own and manage assets funded with NDC grant. It is important to identify which type of organisation will be most suitable for the organisation. Many NDCs are registering as charities, either by: incorporating as a company limited by guarantee; forming a charitable trust; or incorporating as a Community Interest Company. Once the most appropriate structure has been identified the relevant constitutional documents can be put in place.
As a charitable body it is important that the board members are aware of their duties and responsibilities as charity trustees. A large amount of guidance on trustees’ duties is provided by the charity commission’s website (www.charity-commission.gov.uk). Charity trustees have characteristically always been voluntary and therefore unpaid. The reasoning behind this is that charity trustees in their role as trustees should give highest priority to the interests of the charity rather than their own. This is a problem for a number of NDCs who have previously paid their board members, especially resident board members who give up a great deal of time to assist with the work of the NDC.
Payment of Trustees simply for being Trustees – Is this ever allowed?
Although it remains the case that the distinctive feature of charity trusteeship is that it is voluntary and that trustees cannot be paid simply for being trustees, in occasional cases the Charity Commission has authorised such payments.
Usually such payment will only be allowed where a charity’s complexity of operation has led to an unusually high burden of trusteeship, involving the trustees exercising a higher degree of responsibility and supervision in a complex field of activity, perhaps because of the breadth and range of activities undertaken by the charity.
It is very rare that the Charity Commission will allow payment of trustees simply to enable the charity to recruit trustees. To obtain authorisation from the Charity Commission for such payment, the charity will need to show:
- what steps it has taken to recruit trustees without payment and what the difficulties in doing this have been;
- why the charity considers it should pay trustees, rather than for example spreading the duties amongst other trustees or increasing the number of trustees;
- how conflicts of interest about payment of trustees will be managed;
- that the number of trustees to be paid is a minority.
There are limited situations however where charity trustees can be remunerated, which are as follows:
1. Expenses
A charity is allowed to pay its trustees for expenses which are reasonably incurred to enable the trustee to carry out their duties as trustee, for example travel to and from trustee meetings, the costs of postage and telephone calls on the charity’s business. Reimbursement of such expenses is allowed provided the charity’s governing documents do not prohibit it. It is also recommended that the charity has a written expenses policy. Items which would not fall into the category of expenses for which trustees can be properly remunerated include compensation for loss of earnings. Expenditure on such items might however be approved by the Charity Commission and if there is any doubt as to whether or not the expenditure is properly an expense for which the trustee can be remunerated the charity should seek advice.
2. Services
Trustees can be paid for extra services that they provide to the charity which go beyond their normal trustee duties. Examples of services for which trustees can be authorised to be paid by the charity are where the trustee supplies skills to the charity, such as those of an IT consultant, but the trustees must agree that the service is required.
Remuneration for services is only possible as follows:
- Provided that the charity’s governing documents do not specifically prohibit it.
- Provided the charity’s governing documents contain specific authority for payment of services. If the there is no such authority in the governing documents, the charity can apply to the Charity Commission for authority to pay the trustee for services.
- The number of trustees receiving payment for services must be a minority.
- Payment for the services must be in the best interests of the charity.
- The amount of payment must be reasonable, bearing in mind factors such as whether the charity can afford to make the payment, the value and quality of the services, how much other organisations pay for similar services.
- There must be a written agreement between the charity and the trustee who is to be paid.
- The trustee must not take part in trustee board decisions about the payment to the trustee or the value of the service.
In deciding whether and how to remunerate its trustees therefore, charities need to take into consideration a number of factors and in many cases will need to refer the matter for further advice so that more precise guidance tailored to the specific requirements of the charity can be given.
For further guidance on the issues outlined in this article and any other queries in relation to legal services for NDCs and charities please contact Helen Robinson or Eleri Jones.