A conflict of interest arises where a personal interest could, or could appear, to prevent a Trustee from making a decision in a charity’s best interest; where there is no financial benefit there could still be a conflict of loyalty.
Conflicts of interest can arise where there is a transfer of money between the Trustee and the Charity i.e. payment for goods / services / employment; loans; or entering into a contract. Conflicts of loyalty arise where there is no direct financial benefit to the Trustee, however the charity is entering into a financial transaction with a friend, family member, or other connect person (employer / business / charity).
Identifying and managing these conflicts is vital for a charity to demonstrate that Trustees are acting in its best interests. There may be special provisions in the governing document that determine how conflicts should be dealt with and in such instances must be complied with.
Appropriate systems should:
- Ensure that Trustee’s are required to declare any conflicts (interest or loyalty) and have a process for this to happen
- Ensure that the conflict does not have an impact on the decision being taken
- Ensure there is a process for ensuring the conflict and how it has been handled is recorded