NHS charity boards must be prepared to demonstrate their independence or they will lose it, write Abbie Rumbold and Matthew Orme

A recent clash between the Department of Health and the Charity Commission highlights the difficulties of governing NHS charities. Not only are individual spending decisions complex, but the stakes are high: well spent charitable funds can transform the care that patients receive. Furthermore, the decision making process, not just the decisions, is crucial to keeping the charity in a fit and healthy state.

NHS charities often have their associated NHS trust as their sole trustee. This means the trust is the only member of the charity’s board and is responsible for its strategic direction and management. This “closeness” is at the root of the disagreement between the DH and the Charity Commission about whether NHS charity funds should be consolidated on trusts’ books.

The DH said they should if the NHS trust is the sole trustee. The commission says this approach is incorrect.

The government has now said that consolidation can be delayed until the 2011-12 financial year. But the matter is much wider than the presentation of accounts. NHS charities are separate legal entities, and, as a requirement of charity law, their trustees must demonstrate they have taken decisions in the best interests of the charity.

The independence of decision making by charity boards is one of the most important principles of their governance. Demonstrating that independence to the government, the Charity Commission and potential donors over the next year is now more vital than ever for NHS charities.

Which charities are NHS charities?

It is important to be clear about what NHS charities are. Many charities connected with the NHS (eg hospital friends’ charities) are not “NHS charities”.

An NHS charity has:

  • charitable purposes relating to the NHS;
  • trustee arrangements established under NHS legislation;
  • trustees appointed by the NHS.

Who are the trustees?

If the NHS trust is the sole trustee of the NHS charity then there is only one (corporate) trustee. The board members of the NHS trust are not individual trustees. They simply exercise the decision making powers of the NHS trust as corporate trustee. The NHS trust is responsible if there is any mismanagement of the charity.

Steps that will ensure independence

There are five key governance steps towards ensuring independence for NHS charities with a NHS trust as sole trustee.

Board meetings The NHS trust board must separate its decision making on other NHS trust matters from its decision making when acting as the charity’s sole trustee. Charity matters should form distinct sections of NHS trust board meetings (or the board can hold separate meetings for decisions that relate to its role as corporate trustee). The agenda, papers and minutes must all reflect this. The minutes should record the decisions and the decision making process. The decision making must relate to the charity’s objectives, and the framework set out in its annual plan.

Conflicts of interest This is a critical area. Although the interests of the charity and the trust will often coincide, it is important that the trust board recognises that this may not always be the case.

Many non-NHS charities faced with similar situations choose to appoint independent trustees. This means when conflicts arise, conflicted board members can withdraw from the decision and the remaining board members can make an independent decision. This may be an option for some NHS charities.

The NHS Appointments Commission must appoint new NHS charity board members. Others will need to ensure that conflicts are dealt with openly and transparently and with appropriate evidence that decisions were taken in the best interests of the charity.

Annual plan One of the best ways of ensuring that independence can be clearly demonstrated is to adopt an annual plan.

This should be a standalone document. It should state the purpose of the charity and set out in light of this its priorities and strategy in the coming year. Where will it focus its efforts? What criteria will it use to assess spending decisions? How will achievements be measured?

Separate charitable funding proposal papers Specific proposal papers should be put forward for spending decisions by the charity, outlining the rationale for the decision. This helps to ensure that independent decision making processes are followed, and gives further evidence of independence.

Charitable fund committees A committee with different personnel from the trust board, can be set up to manage the fund on a day to day basis. This can help to avoid conflicts of interest. The NHS trust (as corporate trustee) must set the framework in which the committee operates and should review its activities.

NHS charities are important sources of funding and support for trusts, helping them to provide patient care. But their charitable status and consequent requirement for independence must be considered and appropriate steps taken.