"It comes up in cases more than almost anything else" – a case manager on conflicts of interest
We sat down with one of our case managers, John, to talk about conflicts of interest – what they are, why they matter, and what charity trustees often get wrong.
Let's start with the basics. What actually is a conflict of interest?
At its simplest, a conflict of interest is any situation where a trustee's personal interests – or their loyalty to someone or something outside the charity – could influence a decision they're making on behalf of the charity.
A conflict of interest might be financial, like a trustee's family member being paid for work by the charity. Or it might be about loyalty, like a trustee who sits on the board of another organisation that the charity is entering into an agreement with.
Conflicts of interest should be avoided as far as possible, but where a conflict should arise this isn’t always necessarily a problem in itself. Trustees bring their networks, relationships and experience with them – that's often a good thing. The issue arises when a conflict isn't recognised and handled properly.
How common are they?
Very. Conflicts of interest come up in charities of every size and type – from a small community group with a handful of volunteers to large national organisations. In fact, conflict of interest cases have shown a steady upward trend over recent years. And in our casework, they are a factor in many of the most serious cases we deal with.
So, what goes wrong most often?
It’s the first step – just recognising that a conflict exists. That's consistently the part trustees struggle with most, and our annual research backs that up.
People tend to assume that a conflict only matters if something dis-honest is going on. But that's not how it works. A conflict can exist even when the arrangement is perfectly sensible, and the charity is getting a good deal.
A classic example: imagine a trustee's husband is a decorator, and he offers to paint the village hall for half the usual price. The trustees think, great, we're saving money, there's no problem here. But there is a conflict – because one trustee has a personal connection to the person being paid by the charity and has a conflict between the charity’s best interests and their own interest in their husband being paid. That needs to be declared and managed, even if the arrangement ends up going ahead and even if it genuinely is the right decision for the charity.
What should trustees do when they spot one?
Always check your governing document and follow any rules on managing conflicts of interests. If it doesn't say anything, we recommend a step-by-step approach: identify, declare, remove, manage, record.
Once a potential conflict has been identified, declare it – early, before discussions start. Tell the other trustees. Don't just quietly step back from a vote at the last minute; the conflict needs to be on the record.
Then the trustees collectively need to decide how to handle it, and suitably manage it, if they can. Usually that means the conflicted trustee stepping out of the relevant discussion and decision entirely and not being counted in the quorum (the minimum number of members required to make a decision). If there is a payment involved, the trustees must make sure they have a power or authority to make the payment. And critically, you need to write it all down – what the conflict was, who it affected, when it was declared, and what you did about it. If trustees do all of that, it can help demonstrate that they have acted in line with their legal duties, even though the conflict existed. That's the whole point of managing it properly.
And if they don't manage the conflict?
That's where it gets serious. A decision that's been tainted by an unmanaged conflict can be challenged and may not be valid. If the charity loses money as a result, trustees can be personally liable – meaning they might have to cover the loss from their own pockets. That's rare, but it happens.
There's also the reputational damage to consider. Even the appearance of a conflict – even where nothing improper has actually happened – can damage your charity's standing with donors and funders. And it affects wider public trust in charities generally, which is something we all have a stake in protecting.
In the most serious cases, it can amount to misconduct and mismanagement, and we may need to take regulatory action. The Captain Tom Foundation inquiry is a well-known recent example – repeated failures to identify and manage conflicts of interest led to personal benefit for those involved, and the trustees responsible were disqualified.
Any final advice for trustees reading this?
Adopt a conflict of interest policy and make it a standing item at every board meeting. Don't wait until something feels wrong – ask the question every time. Keep a register of interests and keep it up to date. And if you're ever unsure whether something counts as a conflict, talk to your fellow trustees and take advice if you need it. It's always better to raise it and decide no action is needed than to say nothing and face the consequences later.
Our guidance is there to help. It's not complicated once you know what to look for – and getting it right is one of the most important things you can do for your charity.
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