Crewe and Nantwich Voluntary Action .
Ashton House, 1a Gatefield Street, Crewe, CW1 2JP
Advancing Local Voluntary Action.Tel / Fax: 01270 211545 Registered Charity No. 506632
Are You Sitting Comfortably?
ACKNOWLEDGEMENTS
Drafting and consultation for this Code undertaken for NCVO by John Plummer, Audax Enterprise Ltd.
NCVO – voice of the voluntary sector
The National Council for Voluntary Organisations (NCVO) is the umbrella body for the voluntary sector in England, with sister councils in Wales, Scotland and Northern Ireland. NCVO has a growing membership of over 2,000 voluntary organisations, ranging from large national bodies to community groups, volunteer bureaux and development agencies working at local level.
The Local Government Association
The Local Government Association is the national voice for local communities and represents 500 authorities with a population of over 50 million people throughout England and Wales, spending £65 billion a year on local services. Launched on 1 April 1997, the new association provides one strong voice for local government. It promotes the case for democratic local communities which are prosperous, safe, healthy and environmentally sustainable, and provide equality of opportunity for all citizens.
A Code of Practice for Local Authority Members and Officers Serving on the Boards of Voluntary Organisations'
It is beneficial for both the voluntary sector and local government to have close and properly conducted relationships. Such relationships have often been built up over many years and involve a high degree of mutual respect and effective partnership.
Local authority members and officers often serve on or attend the boards of voluntary organisations This is usually natural and healthy. It reflects the interests of the local authorities in the work of voluntary organisations. It also reflects the aim of many voluntary organisations for their work to relate to the wider responsibilities of local authorities. Sometimes such involvement also indicates a long standing interest in a particular issue or cause which may predate the board member becoming a councillor or an officer of a local authority.
In proposing this code neither NCVO nor the LGA is advocating that local authority members and/or officers should serve on the boards of voluntary organisations. Indeed, in some circumstances, particularly where there are contractual relationships between the parties, this might not be appropriate. However, in many cases it has become custom and practice often over many years for members and/or officers to serve on such boards. In these circumstances NCVO and the LGA recommend that the relationship should be reviewed to determine the most suitable arrangement. Where membership of the governing body is judged to be right the recommendations for written agreements between the parties should be followed.
There are increasing calls for good governance in the public, voluntary and private sectors. This requires greater clarity about the relationships between local authorities and voluntary organisations. A written agreement setting out the roles, relationships and responsibilities of local authority members and officers who serve on the boards of voluntary organisations would be a significant step towards good governance. The several different legal forms which are adopted by voluntary organisations have implications for the roles, responsibilities and potential liabilities of board members. It is highly appropriate for relationships to be examined afresh in areas where local government structures have been re-organised because of the likely changes in personnel on the local authority side.
Evidence on these matters was submitted to the Committee on Standards in Public Life (the Nolan Committee) during its inquiry into aspects of the conduct of local government. In its report the Committee recommends "a radical change in the ethical framework within which local government operates" and proposes "a clear code of conduct for councillors developed by each individual council within a framework approved by Parliament". This code is a step towards this objective .
Complex Relationships
There is sometimes an assumption that the primary relationship between local authorities and voluntary organisations is that of giver and receiver of public funds. The reality is much more diverse. In fact they have developed a complex and multifaceted pattern of relationships which depend on different histories and functions. These include strategic partner; advocate for special needs groups; representative of carer and user groups; membership of emergency planning committees; grant aid; service provider; contractor; membership of specialist advisory groups on subcommittees; colleagues in development and regeneration initiatives; developing and managing housing; managers of community buildings owned by local authorities. It is not unusual for a single voluntary organisation to fulfil several of these relationships with a single local authority. Also, large voluntary organisations often work with many separate local authorities.
Potential Difficulties for Both Parties
While the relationship between many local authority members and officers with the other members of voluntary organisations' boards is generally satisfactory, there can be difficulties for both sides. These usually stem from a lack of clarity about the role, the possibility of conflicts of interest, disputes about funding and contractual terms when a local authority is also purchasing services and tensions when a voluntary organisation conducts campaigns about a subject with which the local authority has interests or responsibilities. There are also problems where a local authority member or officer is formally present as an observer at board meetings but is thought to exercise considerable influence over policy and management decisions of the voluntary organisations.
These difficulties are not one sided. Some voluntary organisations expect a local authority
member or officer to serve the interests of the organisation above all other interests and assume that this person will act as an advocate on its behalf at meetings of the Council. Members clearly have an interest in such a voluntary organisation but this cannot be a pecuniary interest as board members cannot receive payment. Must this be declared in meetings of the Council or Committees? Will such interests disqualify the member from speaking and/or voting on a subject which it is reasonable to assume they have greater expertise than their peers?
Note: The boxes shown throughout the text are not intended to form part of the main code but help to illustrate the rationale and importance of the Code, where this does not involve local authority representatives serving on the boards of voluntary organisations
This code does not seek to address a specific mischief or misconduct but to replace ambiguity about the role of members and officers serving on the boards of voluntary organisations with clarity. As a general rule there should be openness and transparency between all the parties both as individuals and also as organisations. This code does not prescribe the precise roles and relationships which are appropriate in every circumstance, because these are many and varied, but it sets out the issues to be addressed and recommends the items which should be included in local agreements. By clarifying the relationships between all the parties the code also aims to contribute to the overall effectiveness of voluntary organisations' boards and local authority members and officers. A thorough review of the relationship between the parties might conclude that board membership is not appropriate and that different arrangements are in the interests of both parties.
Members and officers of local authorities come to serve or attend the boards of voluntary organisations from several different routes. It is useful to identify these because this helps to clarify the relationship.
3.1. Local authority nomination of a member
This usually occurs when local authority has a substantial interest in the area of work of the voluntary organisation and might fund some of its activities and/or purchase services. The Governing Instrument of the organisation may stipulate that the local authority is entitled to nominate a member to serve on the board.
3.2. Local authority nomination of an officer
As at 3.1, except for the fact that the officer might be expected to report back to the executive management of the local authority rather than to a committee.
3.3. Local authority nomination of a third party
Some local authorities nominate third parties from a list of people who are considered suitable to serve on the boards of voluntary organisations. In these circumstances the person might not be held directly accountable to the local authority.
3.4. Voluntary organisation invitation to the local authority
Voluntary organisations may invite a local authority to nominate a member or officer to serve on their boards.
3.5. Members' or officers' personal interest in the subject area of a voluntary organisation
Local authority members and officers are often personally interested in the work of a particular voluntary organisation. In some instances they may have served on the board before being elected to or employed by the local authority.
3.6. A single local authority member or officer on the board of a voluntary organisation covering several or many areas
Some major voluntary organisations may invite one or two people with experience of local government to join the main board. The same concerns arise in respect of any business transacted between the voluntary organisation and the particular local authority of which the person is a member or officer. There is also the separate issue of the person being perceived to advise the voluntary organisation about local authorities more widely.
3.7. LGA nominations to the boards of major voluntary organisations
There is an established custom for local authority associations to be invited to nominate a member or officer to serve on the board of voluntary organisations at national level.
3.8. The local authority member or officer as observer
The risks of full membership of the boards of voluntary organisations causes some local authorities to insist that members or officers should act as observers rather than members of boards with the full duties of trustees and directors. In other instances, members and/or officers are invited with the clear expectation that they will act as observers.
Observer Status
The risks of personal liability are sometimes thought to be avoided if the authority member or officer acts as an observer at meetings of voluntary organisations rather than as a full board member. Also the member or officer is not bound by the legal duty to act in the best interests of the voluntary organisation. However, the member and/or officer may inadvertently influence policy and management decisions while not appearing to bear full responsibility for them. There are risks of acting as "shadow directors" and thus being treated as directors in terms of personal liability.
The voluntary organisation might have difficulty in discussing controversial issues in the presence of an observer who may also represent a major purchaser, funder or contractor.
For the purpose of this paper, the term Governing Instrument is used to include a Constitution, Memorandum and Articles of Association or other document which describes the rules and authority of an organisation.
Voluntary organisations do not fit into a single legal form and the nature of the organisation has a bearing on the responsibilities and liabilities of board members.
4.1. Charities
In which members of the board of registered, excepted and exempt charities will also be trustees of the charity and the former two categories are subject to regulation by the Charity Commission.
4.2. Companies limited by guarantee
In which members of the board will also be directors of the company and subject to Companies Act requirements.
4.3. Housing associations
In which members of the board are likely to be the management committee of an Industrial and Provident Society regulated by the Housing Corporation and the Registrar of Friendly Societies.
4.4. Trading subsidiaries of charities
In which members of the board might, in addition to Companies Act requirements, be subject to controls exercised by the parent charity.
4.5. Unincorporated societies and associations not registered as charities
In which conduct is largely self-regulated but subject to the common law.
4.6. Local branches of national or major charities
In which members of the board are akin to the boards of wholly owned subsidiary undertakings of commercial companies.
4.7. Legally separate bodies which are affiliated to major charities
In which members of the board have a degree of autonomy determined largely by the relationship with the major charity and the status of the separate body.
It is not uncommon for a single voluntary organisation to comprise several of these legal forms. Thus many registered charities are also limited liability companies and might also have a trading subsidiary. Many housing associations are industrial and provident societies but also include a registered charity and a limited liability company.
If a voluntary organisation decides to have a local authority representative on its board (by anyone of the routes set out in 3 above) it is good practice to inform the local authority of the precise nature of that voluntary organisation's legal form. This will be done by providing copies of the Constitution, Memorandum and Articles or Association and any other governing instruments which are relevant to the voluntary organisation on whose board the member or officer is to serve. The local authority has a reciprocal duty to satisfy itself that it has received and comprehended the relevant information about the voluntary organisation, considered the issue of indemnity and communicated this to the individual member or officer concerned.
The parties should agree clear written statements which are then recorded in the minutes of the board of the voluntary organisation and formally reported to the local authority. The precise format of the statements will depend on the process by which the member and/or officer becomes engaged with the voluntary organisation but such statements should address the following topics.
5.1. Relationship statement
The formal purpose status of the voluntary organisation (company, charity, unincorporated society etc. or a combination of these). The relationship between the local authority and the voluntary organisation (funder, partner, purchaser etc.).
5.2. Job descriptions and reciprocation
The formal role and responsibilities of the local authority member or officer (director, trustee, observer etc.).
The frequency of board meetings and minimum attendance requirements.
The period of service and procedure for re-election or reappointment.
A general statement about what is expected of the local authority member or officer, including that the person is chosen for specific skills and experience and is not disqualified by law from acting as a charity trustee.
The voluntary organisation should undertake to provide proper induction training for the local authority member or officer and to inform the local authority promptly if it is decided to change the governing instrument or wind up the organisation.
5.3. Reporting arrangements
The nature and frequency of any formal reports which are required by the local authority and whether these are addressed to a committee or to the executive management (accounts, activities, outputs etc.).
Monitoring arrangements between a local authority and a voluntary organisation which receives grant aid and/or is a party to contracts or service agreements should be described in separate documents but may be referred to under this heading.
It is not always necessary for a local authority to lay down extra reporting arrangements given what is already required of charities by statute and regulated by the Charity Commission. I
The nature and frequency of any reports or information which the voluntary organisation can expect to receive from the local authority.
A statement setting out any requirements for local authority members and officers to report back to the local authority on the conduct and performance of the voluntary organisation.
A statement indicating whether a local authority member has speaking and/or voting rights at Council committee meetings which touch on the affairs of the voluntary organisation.
5.4. Liability and responsibility statement
The responsibilities and liabilities of the members of the board in terms of charitable and public legislation, regulation and accounting standards.
Where the voluntary organisation is a charity the agreement must state that where the local authority member or officer is a trustee there is a duty to act in the interests of the charity rather than the local authority when serving on the board.
The role of observers including the receipt or withholding of confidential papers, attendance or exclusion from meetings, and speaking and voting rights.
Arrangements made by the voluntary organisation to indemnify board members against risks of personal liability.
Arrangements made by the local authority, if appropriate, to indemnify its members and/or officers who serve on the boards of voluntary organisations against risks of personal liability.
The LGA may issue separate advice, after discussion with the Audit Commission and others, on the wider issue of local authorities' capacity to indemnify members and officers who serve on external bodies. This should be communicated to voluntary organisations.
NCVO’s trustee and governance team is dedicated to improving the effectiveness of voluntary sector organisations by strengthening their governing boards and enhancing the skills of trustees who sit on them:
Trustee and Governance Team
National Council for Voluntary Organisations (NCVO)
Regent’s Wharf
8 All Saint’s Street
London N1 9RL
Email: trustee.enquiries@ncvo-vol.org.uk
Website: www.ncvo-vol.org.uk
NCVO Helpdesk telephone: 0800 2 798 798
Switchboard telephone: 020 7713 6161
Nominative, representative or ex-officio trustees
Who are they?
Some charities have trustees who are appointed by another organisation. They are known as representative, nominative or ‘ex-officio’ trustees. They may be appointed by local authorities, health authorities, the police, churches or some other body. The distinction between these and other trustees is that they are appointed by an external body rather than by your membership or by your other trustees.
Nominative or representative – an individual trustee is appointed by an outside organisation. The individual, not the organisation, is the trustee.
Ex-officio – an individual becomes a trustee of a charity because they hold a particular outside office (for example, a vicar or mayor). The individual is the trustee but when they leave office they are replaced by the new office holder.
Why have them?
How long can they serve for?
This will be set out in your governing document. There are special rules governing the appointment of local authority trustees. Section 79 of the Charities Act 1993 sets out the term of office for trustees appointed by a local authority as four years (unless they are filling a casual vacancy, in which case they serve for the maximum term of office remaining). There are also special rules governing the appointment of trustees to parochial charities.
see Charity Commission Publication Charities and Local Authorities
What is their status on the board?
Unless your governing document explicitly says otherwise, nominative trustees have exactly the same status as other trustees on your board regardless of who they represent and how they are appointed. This means:
In short they have the same role as other trustees.
Remember that the individual is the trustee, not the organisation.
Good practice issues
Case Study 1
An officer from the health authority is appointed to the board of a local charity. During a discussion the officer claims that they are not a trustee or personally responsible. They have joined the board in a purely advisory capacity and will be reporting back to the health authority on the work of the charity.
What is their position?
You can only be a board member in an advisory capacity if there is an explicit clause in your governing document which clearly states this. If this is the case then you are not a trustee. However, you should be very careful about your conduct on the board and your involvement in decision-making. It can be quite tempting to express an opinion on a matter and the next thing you may know, you may have influenced a decision. If this happens then you could be held liable for this decision. A good chair should be able to help spot when advisory members are stepping out of the role and gently pull them back. Remember also that because of your role, you may be asked to leave certain parts of meetings where confidential information is discussed – so do not be offended!
A local councillor is also a trustee of a charity. The charity have put in a planning application which some of the Councillor’s local residents are opposed to.
What is their position?
Nominative trustees are there in the same capacity as other trustees. They need to distinguish between their outside role and the role they may have in the board room. When they are on trustee business they are not in any other role. This does not just apply to nominative trustees but any trustee when they have some other role either within or outside the charity (which many of them will have). It is a question of ‘hats’ - you are wearing your trustee ‘hat’ when you are responsible for governing the organisation jointly with other trustees. Remember, though, that when you are outside of a charity you should still be mindful of your duty to it as a trustee as this case study shows - you may be involved in decisions in your other role which may affect your charity.
A trustee has a duty to avoid conflicts of interest. The Charity Commission guidance is that a trustee’s duty to their charity comes first and overrides all other considerations. If a conflict of interest is irreconcilable then the trustee should withdraw from discussion and decision and ensure this is clearly minuted.
In the above case the Councillor clearly has a conflict of interest which may not be reconcilable:
Remember that trustees have a duty to work together and take decisions jointly. If a trustee withdraws from an issue you will not have this person’s contribution - will this be detrimental to the decision-making process?
If they decide to resign then this does not necessarily end the matter as a trustee can remain liable after they have resigned. Suppose the trustee resigned and then successfully had the application refused? Might it be perceived that the individual could have used their inside knowledge to the detriment of the charity?
These are examples of the difficult dilemmas which can be faced by nominative trustees. Remember that whichever decision they take must be taken in the best interests of the charity because that is what they as trustee are there to do.
A board would like to stop the local authority appointing trustees to their board because they do not like the people they are getting.
Your governing document has given another organisation the right to appoint a trustee. Therefore the only way this can be changed is by amending your governing document. If you are considering this then think carefully about how this would look to the outside world and to the local authority. Would changing the document be in the long term best interests of the charity? Is the local authority and the individual nominee clear about the roles and responsibilities of trusteeship? Have they read this information sheet and the NCVO/LGA code of practice Are You Sitting Comfortably?
see NCVO / LGA Are you Sitting Comfortably? A Code of Practice for Local Authority Members and Officers Serving on the Boards of Voluntary Organisations
The same charity would like to remove the present appointed trustee.
Removing trustees is difficult because they are appointed according to the governing document. This means they can only be removed according to these provisions. Check your governing document to see what it says about disqualification or removal. There are certain statutory disqualifications in law and governing documents sometimes also include clauses such as failure to attend meetings.
see NCVO Briefing Difficult Trustees
Good practice guidelines
All nominated members should receive an induction programme tailored to their needs. For ideas, refer to the NCVO briefing Induction of New Trustees. Specific items to tailor to the needs of such trustees include:
A good chair can be an asset in carefully reminding nominative members of their role, ensuring that, however tempting, they do not move into the role of representing their nominating organisation’s views.
Reviews to your board’s structure should always focus on the effectiveness of your present board and how far the current structure is achieving this. Does the involvement of nominated trustees add value to the effectiveness of your
board in governing the charity and ensuring it fulfils its mission? What steps need to be taken to ensure your board structure is effective?
Involving nominated trustees can sometimes be difficult because their process of appointment is from an outside body, leading to possible confusion over fundamental roles and responsibilities. However, a board with a diverse range of perspectives and backgrounds is a step to greater effectiveness if induction and support is in place.
However, it may be a time to revisit your governing document to ensure the present structure is meeting your charity’s present needs. For example, your organisation may have developed a contractual relationship with an outside body who has historically nominated a trustee: is it appropriate to continue this relationship given the possible conflicts of interest the trustee may face?
Further information
Are you Sitting Comfortably? A Code of Practice for Local Authority Members and Officers Serving on the Boards of Voluntary Organisations, NCVO / Local Government Association (NCVO Publications, 1998) £5.
National Council for Voluntary Organisations
Regent's Wharf, 8 All Saints Street, London N1 9RL
Tel: 020 7713 6161, Fax: 020 7713 6300
Registered charity no. 225922
Supported by
† 
† 
†