Publish date

1 December 2023

Charity Fraud Awareness Week – managing payments to trustees

The concept of voluntary, unpaid trusteeship is one of the defining principles of the charity sector. Trustees are able however, to have certain expenses reimbursed to them using the funds of their charity. It is important that charities understand the rules surrounding making payments to trustees, to make sure that they are compliant with their legal duty to ensure the safety, proper use and accountability of their charity’s money.

The Charity Commission provides robust guidance on managing charity finances to ensure that charity money is kept safely, is properly used and is accounted for. Accurate and transparent management of finances assists greatly in ensuring public confidence in charities and contributes to the significant impact of charity work being able to continue.

Making payments to trustees for goods and services

Charities cannot typically pay trustees simply for being trustees. Charities are able to pay individuals serving as trustees, where this is considered to be in the best interests of the charity, and where this presents as the most favourable option in the circumstances. Under the amendments to the Charities Act 2011 by the Charities Act 2022 on 31st October 2022, charities are empowered by statute to make payments to trustees in the following circumstances, being where:

  • Services are provided exclusively, perhaps on a specialist basis, for example computer consultancy
  • Services and associated goods are provided, for example plumbing and associated materials such as parts
  • Administration or secretarial work
  • Goods only are provided, for instance supplying stationery to the charity.

Charities should consult their governing document where such payments are being deliberated to ensure that there are no payments which are directly prohibited.

It is worth noting that where a charity wishes to make a payment to a trustee for loss of earnings for attending a meeting or where it intends to employ a trustee in an alternative role, this must also be authorised in the governing document or by the Charity Commission or the Courts.

In order to make a payment to a trustee, charities must produce a written agreement between the charity and the trustee being paid. This must specify the exact or maximum amount being paid. The trustee benefitting from the payment must not be privy to any of the decision making process regarding the payment. Charities should be aware that the number of trustees receiving payments must be in the minority and must comprise half or more than half of the trustee board.

Trustees must make all decisions regarding making payments to trustees for goods or services in line with their duty of care. Trustees should be confident that any payment can be justified in the charity’s best interests and should keep a clear record of any conflicts of interest that prevents certain trustees from participating in decision making.

Trustees should ensure that where needed they take legal advice on both decision making processes and the legal implications of such decisions.

Payment of expenses to trustees

All trustees are able to claim expenses and they are entitled to have these met using the funds of their charity. The Charity Commission advises that such claims should be made for the purpose of covering ‘out-of-pocket payments’ that trustees have to make in order to be able to carry out their duties. Examples of this may include:

  • Travel expenses to and from trustee meetings or charity events
  • The cost of meals when conducting charity business
  • Postage and telephone calls conducted for the purpose of charity work
  • Childcare or care of other dependents while attending meetings.

Those payments that will not represent legitimate trustee expenses include payment of travel expenses for spouses or partners who are not themselves travelling on charity business and the payment of private medical insurance, amongst others.

To ensure that expenses claims are submitted fairly and transparently, charities should look to implement robust policies regarding managing expenses, outlining exactly where trustees can expect to be entitled to submit expenses claims. Charities should also consider implementing a requirement that trustees must evidence expenses claimed through receipts or bills.

Such a policy should set out exactly what is classed as an expense with an exhaustive list and should outline the procedure for submitting and approving expenses.

Managing and making payments to trustees should be done with confidence and accuracy. Allowing trustees to be paid or make reasonable expenses claims will ensure that all individuals are able to participate in the role of trustee regardless of financial circumstance, resulting in increased diversity and inclusion. These payments must be managed in line with the Charity Commission guidance to ensure compliance with trustee’s legal duty.

If you have any questions about the topics raised in this article, please do get in touch with our expert Charity sector team.

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