News analysis: Will the safeguards prevent conflict?

Charities' new freedom to pay their trustees for services is proving controversial. Paul Jump reports.

Charities Act
Charities Act

The thorny subject of trustee payment is back on the agenda this month, now that charities are allowed to procure paid services from their own trustees without seeking the Charity Commission's permission.

Unless their governing documents explicitly forbid it, charities are permitted by sections 36 and 37 of the Charities Act 2006 to pay their trustees for supplying goods or providing services such as legal, accountancy or building work (Third Sector, 13 February). Previously, such arrangements required the commission's express approval.

That tweak to the law might seem innocuous, but Judith Rich, chair of Charity Appointments and the Diabetes Foundation, has predicted "a riot". She thinks people will see it as a step towards the payment of trustees simply for being trustees.

Debra Allcock Tyler, chief executive of the Directory of Social Change, is staunchly against full trustee payment and thinks there is only a fine line between that and paying trustees for services. Chief executives body Acevo, which supports trustee payment, seems to agree on the latter point: head of policy Seb Elsworth welcomed the new regime in the hope that the commission would "extend this pragmatic approach" to full trustee payment.

A slippery slope?

One factor that could affect how slippery the slope becomes is the number of charities that will be encouraged by the relaxed regulations to begin contracting with their trustees. Allcock Tyler thinks numbers will inevitably rise, but governance consultant Linda Laurence doubts that charities were previously put off by the requirement to seek the commission's permission. "It wasn't a difficult process," she says.

Charity Commission research shows that charities paid out just under £25m to trustees for providing services in the 2005/06 financial year, and the regulator is not expecting a significant rise. A spokeswoman said: "In anticipation of the new rules, we put in place procedures for obtaining our authority that put the onus on trustees to make the sorts of judgements that are required by this power. This change of emphasis didn't result in a huge surge of applications."

But if the numbers do rise, so will concerns about conflicts of interest. The commission insists that there are adequate safeguards in place, such as excluding the service-providing trustee from the decision-making process. Sorp regulations also require charities with annual incomes of more than £100,000 to record payments to trustees in their accounts, and the commission recommends that smaller charities do the same "in the interest of best practice, openness, and transparency".

But not everyone is convinced that the safeguards will work in practice. John Gibson, chairman of the Wessex Reinvestment Trust, is in favour of compensating trustees for loss of earnings, but he is not convinced that making it easier for charities to pay trustees for services will have a good effect. "One thing about trusteeship is that you bring in your chums: it is not a very open process," he says. "The commission is having staff and budget cuts: it will hardly be able to keep up with the number of complaints."

Allcock Tyler emphasises that theoretical rules do not always translate into real barriers. "This is the real world and we are dealing with human beings," she says. "You are essentially asking a charity's executive body to contract with its bosses' companies. Staff are put in an impossible situation when they want to reject a bid or end a contract. And it is also enormously difficult for trustees to tell a fellow trustee that their services are not required - especially if the board meets only three or four times a year."

Something for nothing

One other concern is that making it easier for charities to procure services from their own trustees will make them less inclined to look for people willing to do the work pro bono. One chairman of a charity with an income of about £100,000 can't remember the last time his organisation had to pay for a service. "It can take a lot of phone calls, but it is possible," he says. "A lot of charities are increasingly happy to throw money at things, but that is a total waste of money given in good faith by donors."

He thinks the ethos of charity is about giving and that trustees should also buy into that. "If professionals with no connection to the cause can give their services free of charge, why can't trustees?" he asks.

It is a question that takes us right back to the heart of the debate surrounding the professionalisation of charities: a debate that will doubtless continue to divide the sector for a long time yet.

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