Charity Commission urges Local Authorities to comply with their charity trustee duties


12th September 2024

The Charity Commission has issued a regulatory alert following several cases where local authorities breached their duties as charity trustees.

In one case, the Commission issued an Official Warning to a local authority after finding that that its failure to properly manage 13 charities amounted to misconduct and/or mismanagement in the administration of the charities. The Commission warns that correcting such failings can be costly and resource intensive for local authorities, as well as leading to both public criticism and sometimes financial loss for the charities involved.

Common problems seen by the Commission include the local authority changing the use or status of charitable land, or disposing of it, in a way that is not compatible with its charitable purpose, sometimes without even realising it is charity property and that the authority is the charity trustee. Failure to identify conflicts of interest, not keeping separate accounts for a charity nor complying with requirements for submission of accounts and annual returns are also highlighted.

The guidance makes clear that the duties of a local authority in carrying out the role of charity trustee are the same as those imposed on individuals and the same expectations apply. As well as setting out clearly what those duties are, the guidance usefully draws attention to steps a local authority can take to ensure charity assets are protected and they comply with their duties. These include:

  • reviewing its asset register and clearly identifying on it those assets held which are charitable. If unsure, authorities should consider how they acquired the asset, check whether there is a governing document and establish whether the purposes for which it is held are charitable;
  • making sure it understands how to identify whether it is the trustee or must nominate the trustees;
  • where it is the trustee, deciding on a mechanism for making decisions and exercising its functions (including how these may be delegated) and ensuring that decision-making is carried out in a way that complies with charity law and the principles reflected in the Commission’s decision-making guidance;
  • identifying and managing conflicts of interest e.g. in relation to its role as statutory provider of services or planning authority. Recommendations include putting in place a conflicts of interest policy separate to that for its statutory role and appropriate to the types of charities of which it is a trustee and the ways in which conflicts might arise;
  • ensuring legal requirements for managing and disposing of charity land, are understood and followed. These may include obtaining an expert report, undertaking public consultation or obtaining Charity Commission before disposal; and
  • knowing how to manage small funds so that they continue to effectively deliver the benefits intended when set up.

If you require assistance or advice in identifying charitable assets or ensuring compliance with your duties as charity trustee, please contact Laura Sherratt or Gina Cheetham in Blake Morgan’s Charities team.

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