The Charity Commission has warned that it expects trustees to act to recover property lost to charities through a breach of trust, and may resort to regulatory action against any who do not.
       
The independent regulator of charities in England and Wales has today outlined its policy for cases where trustees or others have, by their conduct, been responsible for such losses.

It wants to make clear that trustees are entrusted with the management and care of charities and so have a duty of care towards their charity, including its property.

Trustees ‘must respond appropriately’

“The Commission expects [trustees] to respond appropriately and where justified act to recover funds lost to the charity caused by deliberate or reckless behaviour,” a statement by the regulator reads.

“The policy makes clear that where serious losses occur, trustees should consider legal advice and the proportionality of their actions when considering questions of recovery.”

Trustees will need to take into account a range of factors, including: the extent of funds lost; the evidence of individual misconduct; the likelihood of success and the ultimate recovery of the loss; and the wider impact on the charity.

The Commission said that it is able to give advice or consent about taking action, but where trustees do not act it will, “in appropriate cases”, consider regulatory action itself to ensure that trustees do pursue the matter.

Inaction could lead to court intervention

“In very exceptional cases where trustees will not or cannot act, the Commission will itself consider whether to bring enforcement action in the public interest,” the statement continues, “including legal proceedings, to recover losses to the charity.

“Other actions may include working with the police, or opening a statutory inquiry leading to regulatory action, for example appointing replacement trustees or an interim manager.”  

Kenneth Dibble, the Charity Commission’s chief legal adviser, added that the regulator could go even further.

He said: “The Commission will not hesitate in appropriate cases to protect and recover charitable property by the use of its powers or, if necessary, take action through the courts.”

The Commission acknowledged that trustees are volunteers who give the time and expertise for the benefit of their charities, and that it does not wish to dissuade individuals from taking up a trustee role through fear of “being held responsible for actions honestly but reasonably undertaken, even if losses do arise”.

The Charity Commission’s full guidance on this matter can be found on its website here.