Published: 24/02/2005, Volume II5, No. 5944 Page 28

Nearly all trusts hold charitable funds of some sort. They are particularly significant after mergers, when the institutions to which they were given may no longer exist, and their charitable purposes will need adapting. It is important for trusts to ringfence funds and ensure they are correctly managed.

Charitable funds must be used solely for their specified purposes. In some cases there can be dozens of them under the trust's charitable funds umbrella. If they have passed between trusts in a reorganisation, an immediate review is necessary.

Individual funds may need to be wound up, or merged with others.

Charitable funds are subject to the jurisdiction and regulation of the Charity Commission and accounts lodged with it annually. Duties and responsibilities are laid down in the Charities Act 1993 and the Trustee Act 2000. The trust board is responsible for the funds.

Administration is the most demanding and fundamental aspect for the trust. As a corporate trustee, the trust operates through the board.

Board meetings should be arranged so the work as charity trustee is clearly distinct from NHS business.

Recommended practice is for the trust to delegate the administration of charitable funds to a charitable funds committee.

This avoids the main risks of dealing with charitable funds at board meetings, where the distinction between exchequer and charitable can become blurred, and charity business given low priority.

Such a committee has clear responsibilities. To assist it and protect the trust board, with whom ultimate responsibility remains, there should be clear, delegated authority between the two, the terms of reference making it absolutely clear what is expected of each.

Jean Dollimore is a partner in the charities team at law firm Hempsons.