Charity trustees naturally have a surplus of financial responsibilities, but they also need to have a secure grasp of regulatory compliance to make informed and legally compliant decisions.

Making decisions is one of the most important parts of a trustee’s role, and if there is a shared confidence around the regulations and responsibilities involved, the right decisions should more easily present themselves.

Complying with the governing document

The governing document (this might also be known as the constitution or charity’s trust deed) is paramount when it comes to making compliance and regulatory decisions.

It is the role of trustees to make sure the charity is complying with the rules set out in the governing document. Every trustee must have a copy of the governing document and it should be regularly reviewed and referred to, ensuring it continues to meet the charity’s needs.

Governing documents are legal records and any changes should be carefully considered. The Charity Commission has templates and guidance for model governing documents.

Decision making

There are, of course, a multitude of decisions to be made when it comes to running a charity, and it is down to the trustees to make ones that are in the charity’s best interests.

Mutual decision-making to questions large and small has the most significant impact on a charity. Some decisions may be simple, others extensive in their consequences.

If a decision is going to have an impact on the strategic direction of a charity, then clarity and proper accountability must be present in the decision-making process.

Keeping informed

Trustees need to be able to demonstrate that their decisions are based on sufficient and appropriate evidence. There is plenty to consider when it comes to determining ‘appropriate evidence’, much of which will depend on the specific circumstances of the decision and the charity making it.

What is the cost; how complex is the issue; what is the impact and associated risks of the decision; how far-reaching is the impact; and how urgent is it?

Risk assessments may well assist in trustees reaching an informed decision, and the Charity Commission has helpful guidance on Charities and risk management.

Maintaining records

Important decisions should be recorded (usually within the minutes of a meeting), showing how and when decisions were made, in case there is a need to refer to them in the future.

Records should include the meeting date and who attended; any conflicts of interest; options that were considered and the main reasons for the decision; any disagreements worth noting; and the results of any vote.

The legal requirement is that trustees have a duty to make decisions ‘collectively’. However, this does not have to mean that the trustees must all agree, or that a decision can only be made if every trustee takes part.

Differences of opinion are inevitable and should be aired and shared. If some trustees disagree with the majority, this should be recorded in the minutes of the meeting. An open and collaborative culture will, in turn, instigate more informed decisions that benefit the causes a charity was created to help.

Time to delegate

Some decisions may be suited to delegation (where the governing document permits it), with trustees seeking the view of executive staff or committees.

Delegation calls for transparency of process to ensure the right procedures are being followed and decisions documented. Reporting should be robust and lines of accountability in place.

There are also a few situations where trustees need to contact the Charity Commission when making a decision – because only it can give the advice or permission required. Examples of this include complex charity mergers and restructuring, serious concerns about the charity’s administration, or any other situation where trustees may be unable to comply with their legal duties unless they get the commission’s advice.

Sometimes it might also be helpful to consult stakeholders about important decisions. The people who are consulted should be clear that the final decision will ultimately be made by the trustees.

Follow the guidance

Decision-making is a complex process, with lots of changing factors that influence the process and eventual outcome. Sometimes, in hindsight, the best decisions are not always made, but by following clear guidance, trustees can take confidence from the fact that they made a collective decision based on the facts available at the time. Courts would not hold trustees personally liable for a breach of duty if they have acted honestly and reasonably.