Governance for charitable trusts

What is a registered charitable trust?  

There are two parts to this answer:

• a trust which is created when a fund is held by trustees to achieve a purpose. 
• a charity becomes registered when it applies to Charities Services (it is possible for a charitable trust to be created which is not a registered charitable trust. 

The purpose 

The “trust” refers to the fact a fund has been created which trustees have agreed to look after in order to advance charitable purposes.  Those purposes could be one of the following:

• advancing education
• relief of poverty - for example, setting up a food bank or providing a shelter for the homeless
• advancing religion
• or other purposes beneficial to the community – this does not cover anything which is “good” it must actually benefit the community, such as providing a community hall, setting up a crisis line for troubled people to call, developing and preserving a historical site or an environmental project to protect and preserve a river. This type of activity doesn’t easily fit one of the other three purposes but does benefit the community.

These four charitable purposes are known as the “four heads” of charity.

The fact that a trust plans to do some “good” does not necessarily mean that they will qualify as charitable at law. This is important because the “charity” aspect refers to the registration of that trust as a charitable entity with Charities Services.  This results in certain benefits such as tax donee status and the ability to issue receipts to donors so they can claim back 1/3 of what they donate to a charity.  In what follows we are talking about registered charitable trusts.

Why is effective governance important for charitable trusts? 

These entities are often more in the public eye than private enterprises. To gain charitable status they need to be open about their mission and purpose and ensure there is no private gain.  They are also given significant tax advantages and so are accountable for how they use funds which the public donate, or they raise.  The entire sector is discredited when there are reports of fraud or similar activity which sometimes could have been stopped if high standards of governance had been in place.  For these reasons it is vital that those on charitable trust boards operate in a way that is above reproach. 

Key questions on the governance of charitable trusts

• Are there unique drivers of governance for this sector?
• What are the usual legal structures under which these boards operate?
• What are the key functions of boards of charitable trusts?
• What added dimensions shape governance?

Often those on charitable trust boards are volunteers and some may have had minimal exposure to professional governance in the past – in answering the questions above, and using the resources in this hub, those in governance roles will develop the confidence to engage effectively with their board and other trustees.

To realise the potential that effective governance can provide, trustees of charitable trust boards should be focused on professional development to continuously grow and improve their organisations. To realise the potential that effective governance can provide, trustees of charitable trust boards should be focused on professional development to continuously grow and improve their organisations.

See further governance information on the right hand menu on this page.

We also provide a series of learning modules that will support your governance development.