Who's in control of your charity?
Posted: Friday 13 January 2012
Shetland Charitable Trust - A case study
In last June’s Third Sector e-bulletin, we mentioned that OSCR had published its ‘Who’s in Charge’ guidance, which set out OSCR’s concerns where there is ambiguity or disagreement over who is in charge of a charity. We recommended the guidance was worth a read as it contained useful guidance and case studies. Shetland Charitable Trust - one of the case studies - has hit the headlines again, and we thought it was worth drawing to your attention.
Some of you will be aware that there is a large oil terminal in Shetland – Sullom Voe. In order to compensate Shetlanders for the inconvenience of having this terminal on their doorstep, an arrangement was reached whereby compensation was paid by the oil industry. The Trust was set up in 1976 to distribute this cash for the benefit of the local community. It’s worth mentioning that this is no small, rural charity – apparently, it has assets of more than £200 million.
The Trust got into bother with OSCR back in 2008, because there were concerns about the way the charity was making decisions and how it was managing conflicts of interest. OSCR investigated these concerns – they found that:-
- out of the 24 trustees, 22 were councillors;
- all of the trustees had been assumed into their roles because of the positions they held externally;
- 23 trustees owed a duty of care to the local authority (as well as to the charity);
- the charity had a conflict of interest policy but it wasn’t clear that it was followed; and
- ambiguity over who was in control of the charity led Audit Scotland to qualify its accounts for Shetland Islands Council since 2006.
It seems fairly obvious that these arrangements could call into question the charity’s independence, and whether the trustees could truly be said to be acting in its best interests. The charity took steps to rectify some of these issues and OSCR then closed its enquiry, but - in June 2010 - imposed monitoring requirements on it, regarding how it dealt with conflicts of interest.
All appeared quiet, and then this week, we noticed an article in Third Sector about the charity. The article indicates that in December 2011, OSCR wrote to the charity accusing the trustees of misconduct. The board subsequently held a meeting at which most of them agreed a proposal for change, which included re-shaping the board so that the number of trustees will be cut to 15, consisting of 7 councillors, and 8 individuals who would be appointed by an independent selection panel.
This got us thinking about what charities can do to avoid getting into the situation which Shetland Charitable Trust has found itself. Here are some suggestions:-
- look at what your charity’s constitution says;
- think carefully about the make up of your board. How are trustees appointed? What criteria must they meet? If the board will be dominated by individuals from another organisation, think about how this can be balanced out;
- make sure your organisation has a conflict of interest policy. This can form part of its constitution, or it could be a stand alone document. But whatever it is, make sure the trustees know about it, understand it and follow it!
- make sure the trustees also understand that they need to act in the best interests of the charity, particularly where they have been appointed as a trustee in order to represent another organisation – this doesn’t always automatically mean that they are conflicted, but it might.
Morton Fraser frequently advises organisations on the terms of their constitution. If you would like to discuss this, or if you think your constitution could do with a review, please feel free to contact Lauren Scott by emailing lauren.scott@morton-fraser.com or by calling 0131 247 1085.
