Most trustees with any common sense know that putting their spouses on the charity's payroll without a proper recruitment process or borrowing its transport for family holidays are clear conflicts of interest.
The pitfalls of perception
What can be harder for a board to gauge is the propriety of buying services or products from one of their own. If you can get them cheaper from a trustee, or at market rates but with added extras, then where's the harm?
The main pitfall is one of perception. Trustees must not gain from their positions, and charities should remove any chance of a conflict of interest.
It's inevitable that the charitable sector is judged against high standards of integrity. Failing to demonstrate these is disproportionately damaging to charities - they have much further to fall.
It can seem that the media is on constant alert for tales of charities tripping up, and it's a short route from the papers to a loss of support, funds and reputation - or, indeed, a letter from the commission asking for more information.
The importance of policy
Creating a code of conduct and a policy that is consistently applied is key, and prevents bad decisions being made under pressure.
A Guide to Conflicts of Interest for Charity Trustees on our website, under 'guidance for charities', helps boards identify and manage them.
It also highlights the use of the charity's governing document in these situations and explains when boards should come to us for authorisation.
The forthcoming Charities Act offers boards more freedom when it comes to trustee remuneration, but it also gives them greater responsibility for ensuring conflicts of interest don't happen. So creating and implementing a policy is a timely response.
- Rosie Chapman is executive director of policy and effectiveness at the Charity Commission.