The conflict-of-interest case at the gallery has serious implications for other charities, writes Helen Warrell.
The art world is used to controversy, but this time the artistic licence is in the boardroom rather than the studio. Two weeks ago, the Tate was rapped on the knuckles by the Charity Commission, which said the management was guilty of "serious shortcomings in the process of managing conflict of interest" when buying artworks from serving trustees. The judgment could have consequences for all charities.
The situation at the Tate was raised in August last year, when the Stuckist group, a radical art movement, persuaded The Sunday Telegraph to publish details of the Tate's purchase of a series of paintings called The Upper Room from one of its trustees, Chris Ofili. The 13 mixed-media paintings, each depicting a monkey rendered in glitter, resin and elephant dung, cost the administration £600,000.
Spurred by media allegations that the purchase constituted a conflict of interest, the Charity Commission reviewed the Tate's acquisition procedures.
It concluded that the Tate had acted illegally when buying the Ofili paintings, because it had not sought specific permission for the purchase from the commission, as required by its governance regulations.
The commission also found that the Tate had neglected policy in transactions relating to seven other works bought from five of its artist-trustees.
In some cases, the trustees had not left the room when the purchase of their work was being discussed, and the review drew particular attention to the fact that valuation of the works was carried out by the Tate's own curators rather than external valuers.
The problem took years to come to light because, as an exempt charity, the Tate reports primarily to the Department for Culture, Media and Sport rather than the Charity Commission. Andrew Hind, the commission's chief executive, explains that the Tate does not have "regular contact" with the commission and that the "regulatory relationship" between the two is different to that which the commission has with most charities. "Our powers don't apply in the same way," he says.
Nevertheless, the consequences of this review will affect not only other exempt charities - museums, galleries, and certain universities - but regular charities as well. Few will be buying art from their trustees, but many have provisions in their governance documents that allow them to pay a trustee to undertake a professional service, such as legal or accounting work.
The new Charities Bill, set to come into force this November, will effectively make it easier for trustees to do paid work. But charities will be under increased pressure to prove that any such transactions are fully above board.
Karen Heenan, chief executive of the Charity Trustee Network, is adamant that heightened awareness is "no bad thing". "Charities need to be welcoming of scrutiny," she says. "I really want to develop the sector's transparency."
Charities wishing to strengthen their code of conduct for conflict of interest are spoilt for choice. The Charity Commission has extensive conflict-of-interest guidelines on its website, and the Good Governance Code, developed last year by a partnership of organisations headed by the Governance Hub, details strategies for good practice. Lord Nolan's seven principles for standards in public life are another useful reference point.
Lucy Clarke, a solicitor in the charity and philanthropy department at Withers, says creating proper policies is essential. "With any charity, it is a basic principle that trustees should not benefit unless it has been authorised," she says. "Even if the transaction has been authorised, the full conflict-of-interest procedures need to be in place."
But Tesse Akpeki, an independent governance consultant, warns it is no use having a code just for the sake of it. "Only about 70 per cent of policies tend to be implemented," she says. "If a charity develops a code, it must be acted on so that it is taken seriously."
Akpeki adds that charities should have a register of interests for trustees that is updated annually so any potential problems can be properly managed.
"Conflict of interest will always happen because people tend to get involved in organisations because they are interested in those particular issues," she says. "The bigger the organisation and the higher-profile the trustees, the more likely that conflict of interest will be a problem."
But, according to Hind, it's not all bad news. "Charities are much better at dealing with conflict of interest than they were five or 10 years ago," he says. "That is why we were so disappointed with the Tate case. Charities have benefited from the debate across all sectors, so I don't think these conflicts are happening on a consistent basis."