Why conflicts of interest matter for charities

A recent blog from the Charity Commission for England and Wales highlights a growing concern across the sector: many trustees are still unsure how to recognise and manage conflicts of interest, and this can put their charity at real risk.

Conflicts of interest are not unusual. They can happen in any charity, especially where trustees have connections to other organisations, businesses, or individuals. What matters is how these situations are handled.

What is a conflict of interest?

The Charity Commission explains that a conflict of interest arises when a trustee’s personal interests, or their loyalty to another organisation or person, could influence their decision-making.

There are two main types:

• Financial conflicts – where a trustee (or someone connected to them) could gain money or another benefit
• Loyalty conflicts – where competing responsibilities or relationships may affect judgement

Even the perception of a conflict can damage trust if it is not properly managed.

Why this is a growing issue

The Commission’s blog draws on recent evidence showing:

• A rise in cases involving private benefit and misuse of funds
• A 23% increase in related compliance cases in a single year
• Many issues linked directly to unmanaged conflicts of interest

Importantly, most of these problems are not deliberate. The research suggests they often happen because trustees simply do not recognise when a conflict exists.

The risks of getting it wrong

Failing to manage conflicts properly can have serious consequences:

• Decisions may be legally invalid
• Charities could lose money or face reputational damage
• Trustees may be personally liable for losses
• The Commission may view it as misconduct or mismanagement

Perhaps most importantly, poor handling of conflicts can undermine public trust in charities, which is essential for the sector to function.

What trustees should be doing

The Charity Commission’s guidance sets out a clear, practical approach:

1. Identify conflicts early; Trustees should actively look for potential conflicts, ideally as a standard agenda item at meetings, and keep a register of interests.

2. Declare conflicts openly; any conflict should be declared before discussions or decisions take place, and recorded in meeting minutes.

3. Consider removing the conflict; in some cases, the best option is to avoid the situation entirely. For example, by not proceeding with a proposal.

4. Manage the conflict properly; if the conflict cannot be removed, it must be carefully managed. This usually means the conflicted trustee:

• Leaves the discussion
• Does not take part in decisions
• Is not counted in the quorum

Policies and good governance

The Commission also stresses the importance of having:

• A clear conflicts of interest policy
• A regularly updated register of interests
• Trustees who understand their responsibilities

These steps help ensure consistency, transparency, and compliance with legal duties.

Key takeaway

The Charity Commission’s message is simple: conflicts of interest are common, but failing to manage them is not acceptable.

With clearer guidance now available, trustees have the tools they need. Taking conflicts seriously, and dealing with them openly, will help protect individual charities and maintain trust across the whole sector.

Read our article, "Conflicts of interest and how to deal with them" here. 

For expert guidance on any of the matters raised in this article, or for any operational questions relating to your charity, please contact our Community Development Officers on 01362 698216 or by email.