At the heart of that sits something less tangible, but arguably more important: ethics, integrity and judgement.

A recent regulatory probe into a charity that loaned £900,000 to a Trustee’s son is a timely reminder that governance is not just about having policies in place. It is about how those policies are applied – particularly when decisions become personal.

A Quick Clarification: What Do We Mean by “Related Parties” and “Conflicts”?

Before going further, it is worth grounding two terms that are often used, but not always fully explored.

Related parties are individuals or organisations connected to the charity through influence or relationship. This can include:

• Trustees and senior management
• Close family members
• Businesses controlled by those individuals

A conflict of interest arises where a Trustee’s personal interests – financial or otherwise – could influence, or be seen to influence, their decision-making.

Conflicts of interest are not unusual and in the charity sector they are generally considered inevitable.  The issue is not their existence, but how they are handled.

When Relationships and Decisions Intersect

In the case under investigation, the concern is not simply that a loan was made to a connected party.  Charities can enter into such arrangements in limited circumstances.

The real questions are more nuanced:

• Was the decision demonstrably in the charity’s best interests?
• Was there sufficient independence in the decision-making process?
• Were the risks properly assessed and documented?
• Was the conflict managed in a way that would stand up to scrutiny?

This is where governance moves beyond compliance and into judgement.

Where Judgement Matters Most

Related party transactions often arise for understandable reasons. Trustees bring valuable networks, expertise and opportunities. In some cases, those connections can appear to offer a practical or even advantageous route forward.  Most Boards approach these situations with caution and a strong ethical mindset.

However, these decisions carry additional weight because they introduce:

• Perception risk – how the decision may be viewed externally
• Bias risk – even where intentions are sound
• Concentration of influence – particularly in smaller Boards

This is why the standard of evidence, challenge and documentation needs to be higher – not because Trustees lack integrity, but because these situations require greater clarity.

A useful “sniff” test remains:  “Would we be comfortable explaining this decision openly – to a regulator, a donor, or the public?”

Supporting Good Decisions

Most charities already have clear conflict of interest policies in place.

The challenge is not a lack of intent, it is maintaining consistency in how those principles are applied, particularly when time is limited, decisions feel urgent and the individuals involved are well-known and undoubtedly trusted.  Strong governance, in practice, often comes down to discipline in familiar situations.

A structured approach can help:

1. Declare the interest early  Create space at the outset of discussions to identify conflicts clearly and without hesitation.

2. Step away from the decision  The conflicted individual should not participate in the discussion or decision-making. This protects both the individual and the Board.

3. Create space for independent challenge  Ensure the remaining Trustees have the information, confidence and time to question the proposal properly – and, where necessary, seek external advice.

4. Document the Rationale  Clear, balanced minutes are not bureaucracy; they are protection. They demonstrate that the decision was considered, challenged and justified.

Culture at the Top: The Risk That Is Harder to See

Governance is not just about process. It is also about culture.

In many charities, Boards are collaborative, committed and values-driven. However, challenges can arise where:

• one voice carries disproportionate influence
• relationships make challenge feel uncomfortable
• Trustees defer decisions upwards rather than debate them

This is rarely intentional. More often, it reflects respect, trust, or time pressure.  But over time, it can lead to decisions that are insufficiently tested.

Strong Boards safeguard collective judgment by ensuring a safe environment where:

• challenge is expected, not avoided
• differing views are respected and explored constructively
• decisions are strengthened through discussion, not accelerated by subservience

The Anchor Point

Trustees’ fiduciary duties provide the framework for navigating these situations.  In practice, this means:

• Acting in the charity’s best interests – with beneficiaries at the centre of decisions
• Applying independent judgement – even where relationships are involved
• Protecting the charity’s assets and reputation – including how decisions are perceived

These duties are not abstract. They are the lens through which all decisions, regardless of their severity, impact or complexity, should be viewed.

Where Governance Is Truly Tested

Governance is not usually tested in routine decisions.  It is tested when:

• the opportunity looks attractive
• the individuals involved are known and trusted
• and the answer is not immediately clear

These are the moments where ethics, integrity and judgement need to be most visible, because even well-intentioned decisions can create risk if they are not robustly challenged and clearly evidenced.

A Practical Reflection for Trustees

Rather than viewing this as an isolated case, it is worth asking:

• Do we maintain an up-to-date and meaningful register of interests?
• Are conflicts actively explored, or briefly noted and moved past?
• Do all Trustees feel able to challenge constructively?
• Would our documentation explain not just what we decided, but why?

Strong governance is not about perfection. It is about consistency, awareness and respect.

The Profit Builder’s Perspective

In a commercial context, weak governance distorts financial clarity. However, in a charity, the risk is far more fundamental – degradation of trust.

The most effective Boards recognise that:

• integrity is demonstrated through process
• transparency builds confidence
• and thoughtful challenge strengthens outcomes

Because when governance is clear, decisions carry weight – and trust follows.