Under Governance Standard 5, your charity must take reasonable steps to make sure its Responsible People meet certain duties.
When appointing a new Responsible Person, charities can use our template letter of appointment, which sets out the duties under Governance Standard 5.
The following is a general summary of what each duty requires.
Responsible People are in a position to guide and monitor the management of the charity. They need to understand and stay informed about the charity’s activities and finances.
For example, it may be a breach of this duty if a Responsible Person failed to attend several board meetings in a row. However, this duty is not breached if a person cannot take part in managing the charity due to a bout of illness at a particular time, for example.
A Responsible Person can also rely on or draw on the special knowledge or expertise of another Responsible Person, adviser or expert, as long as they adequately inform themselves and make an independent assessment of that information or advice.
Responsible People must make decisions in a way that sees them honestly consider what would be in the best interests of the charity, and what would further its charitable purposes (as set out in the charity’s governing document).
For example, this duty is breached if a Responsible Person makes a decision which results in charity property or finances being used in a way where there was no real benefit to the charity or no furtherance of its charitable purposes.
Responsible People may be part of processes that can see them making decisions about the use of charity finances or other resources. They must not misuse their position.
An example of a Responsible Person misusing their position would be where they are involved in their charity paying another company owned or controlled by a friend or relative (when it is not reasonable payment for the goods or services provided).
Responsible People may be privy to sensitive or private information as part of their role. They must not misuse this information.
An example of misusing information is if a Responsible Person gives confidential information about the charity’s operations that they have gained because of their role to another person or organisation – even if it is to another charity.
Responsible People should disclose any situation where they may appear to have a conflict between their duty to act and a personal (private) interest, and should not discuss or vote on any matter where there is such a conflict.
For example, if a charity is considering which company to buy its stationery from, a Responsible Person should declare an interest if one of the companies is owned by his relative. This is true even if there is no actual conflict.
A conflict should be disclosed whenever an independent observer could doubt that a Responsible Person is acting in the best interests of the charity.
In general, the Responsible Person should disclose the conflict of interest to the other Responsible People.
If the charity has only one Responsible Person, or all of them have a conflict, then the conflict of interest should be disclosed to the members of the charity (if any).
For more information, read our managing conflicts of interest guide.
As a minimum, Responsible People should have good processes to prevent problems and to manage money responsibly.
This includes reading financial statements and having a process to ask questions if they don’t understand them.
For more information, read our guides on managing charity money.
If a Responsible Person reasonably suspects that the charity cannot pay all of its debts when they become due, then they should take all reasonable steps to prevent the charity from taking on more debt.
The governing body should regularly review the charity's financial position and ensure there is enough money to pay for its activities.
For more information, see our guidance on charities and insolvency.