The Lothian Health Board Endowment Fund, a charity that funds NHS hospitals in Lothian, Scotland, appointed all of the members of the Lothian NHS Board as trustees without first telling them it would do so, according to the Office of the Scottish Charity Regulator.
A new report from the regulator, Who’s In Charge: Control and Independence in Scottish Charities, uses the charity as an example of cases in which governance needs to be improved.
It says the OSCR examined the body’s charitable status as part of a review of selected charities, which the regulator carried out last year.
"All of the charity trustees also sat on the NHS board and were appointed ex officio – that is, only by virtue of being appointed to the health board," the report says.
"During the recruitment process for NHS board members, the candidates were not made aware that by taking up an NHS board post they automatically became a charity trustee as well."
It says that, once appointed, the candidates were given induction training that was specific to their roles as charity trustees.
The report adds that the charity’s purposes, although charitable, are identical to those of the NHS board.
It says the regulator allowed the charity to keep its charitable status, but said it had to make sure the charity trustee role was made clear to people when they applied to be members of the NHS board.
The OSCR also told the charity to "make practical arrangements to show the public that it is acting autonomously", and suggested that these could include holding meetings separately from the meetings of the NHS board.
The regulator warned the charity it "had to be able to show that, in a situation of conflict where the charity trustees’ duty to the other body might influence how it used its funds, the charity trustees would decide only on the basis of the charity’s interests and not the needs of the other body", the report says.
Carol Paton, interim charity director at the Lothian Health Board Endowment Fund, said the charity had made "considerable progress in responding to the recommendations".
She said trustees had started a strategic review before the OSCR carried out its investigation.
"The trustees approved a new corporate governance framework last month," she said. "This framework reflects the recommendations made by the OSCR and is now being implemented."