The Charities Regulator has acknowledged that conflicts of interest can arise in charities, but says that problems arise when they are not managed appropriately.
The watchdog has issued guidance to the boards of charities on how to manage such conflicts of interest effectively.
The regulator reminds charities that a trustee has a duty to act in the best interests of the charity.
“A conflict of interest is any situation in which a charity trustee’s personal interests or loyalties could, or could be seen to, prevent the charity trustee from making a decision in the best interests of the charity,” it states.
“This personal interest may be direct or indirect, and can include interests of a person connected to the charity trustee,” it adds.

‘Take the test’

The watchdog warns that failing to effectively manage conflicts of interest can affect the charity in terms of its governance and the associated reputational risk.

It advises trustees to take the ‘conflict-of-interest test’, and ask themselves: “Would a reasonable person (who was aware of the charity trustee’s personal interest) believe that you might be influenced by your personal interest when making a decision on behalf on the charity?”

If the answer is ‘yes’, then you have a potential conflict of interest, the regulator says.

Its guidance sets out steps that charities should take to identify, manage, and record conflicts of interest.