Restitution and the recovery of charitable funds

The Charity Commission has published its policy and approach to the recovery of property which has been lost to charity through a serious breach of trust.

This breach of trust could be by trustees or others who, by their conduct, have been responsible for its loss. The points raised in the policy include that:

• Trustees are volunteers, and it is important that people are not put off from acting as trustees because they fear they might be held responsible for actions honestly but reasonably undertaken, even if losses do arise.
• Trustees have a duty of care towards their charities and its property. As such, the Commission expects them to respond appropriately and where justified act to recover funds lost to the charity caused by deliberate or reckless behaviour.
• Where serious losses occur, trustees should consider legal advice and the proportionality of their actions when considering questions of recovery. Where they do not act, in appropriate cases, the Commission will consider regulatory action itself to ensure that trustees do pursue the matter.
• In very exceptional cases where trustees will not or cannot act, the Commission will itself consider whether to bring enforcement action in the public interest, including legal proceedings, to recover losses to the charity. 

The guidance means that whilst charities should not scare off potential trustees by failing to make it clear to them that they will not be held liable for losses which come about when they have acted in the best interests of the charity, they should ensure they are aware of their responsibility to protect those interests.

Charities should also empower their trustees to investigate any losses and, where the costs are proportional, to attempt to recover property; as if charities do not take action the Charity Commission may enforce upon the organisation.

For further information and to read the full policy visit www.charitycommission.gov.uk/our-regulatory-work/how-we-regulate-charities/how-we-ensure-charities-comply-with-their-legal-requirements/our-policy-on-restitution-and-the-recovery-of-charitable-funds-misappropriated-or-lost-to-charity-in-breach-of-trust/.