The Charity Commission has released updated guidance for local authorities who are acting as corporate trustee of a charity. This follows the first official warning made to a local authority for failing to comply with its duties as a trustee, where it was acting as trustee of 13 different charities.

There are over 1,200 charities in England and Wales with a local authority acting as a trustee. Local authorities can unknowingly find themselves acting as trustee to community assets such as recreation grounds, concert halls or historical buildings when a donor leaves that land to the local authority on condition it is used for charitable purposes. Being a trustee carries with it specific legal duties and expectations.

Understandably, this is an area that can often trip up local authorities who may not be familiar with the intricacies of charity law. Common issues that the Charity Commission highlights include local authorities attempting to change the status of the land, failures to keep separate accounts for the charity and failures to submit relevant returns. In some cases, local authorities were simply unaware that they were acting as a charity trustee.

The consequences of acting in breach of charity trustee duties can be costly in terms of resource and funds, as well as potentially leading to public criticism for the local authority involved.

What are the key duties of local authorities acting as charity trustees?

The Charity Commission’s guidance outlines the key duties for a local authority acting as a charity trustee. These are the same duties that would apply to an individual person appointed as a charity trustee, and local authorities must ensure that they are familiar with the duties. These include:

1. ensuring that charity property is only used for the charity’s purpose
2. ensuring that proper mechanisms are in place to allow decisions to be made in the LA’s capacity as a trustee
3. ensuring that any decisions made are solely made in the best interests of the charity
4. identifying and managing conflicts of interest, and where required, obtaining authority from the Charity Commission
5. complying with its responsibilities relating to accounting and reporting.

The Charity Commission has written to every local authority and recommended that every local authority should review their asset register to identify any charitable assets so they can be dealt with appropriately.

The Charity Commission has also provided a helpful checklist at Annex A of its updated guidance to assist local authorities in their governance of charities. The checklist can be viewed at the following link here.

How Capsticks can help

Local authorities acting as trustees should take note of the Charity Commission’s guidance. Every charity trustee must ensure they are fulfilling their legal duties. Local authorities can only do this if they properly understand what it means to be appointed as trustee of a charity. Local authorities should therefore be reviewing their asset registers to determine whether they are indeed a trustee of any charity property and then familiarising themselves with the role of charity trustee. 

Capsticks provides multi-service support to Local Government organisations nationally. Our Local Government team advises on corporate governance and charity law advice.

If you have any queries around what's discussed in this article, and the impact on local authorities, please speak to Darren Hooker or Georgia Moon to find out more about how Capsticks can help.