Conflict of Interest

Conflicts of interest can arise in organisations of any size and if mishandled can lead to a loss of trust in the charity, reputational damage or invalid decisions.

Correct management of conflicts of interest is vital for trustee boards to ensure that decisions made are in the best interests of the charity rather than unduly benefiting a trustee due to their personal or professional connections. For organisations that employ staff conflicts of interests could extend to senior staff members.

There are two common types of conflict of interest

Financial conflict

A financial conflict occurs when a trustee, or someone connected to them, stands to gain monetarily or receive something of value from a decision made by the charity. This does not include reimbursement for legitimate expenses incurred while performing trustee duties.

For example:

A trustee suggests hiring a consultancy firm for a strategic project, failing to disclose their ownership of the firm. If the charity proceeds without this knowledge, the trustee benefits financially, creating a conflict between personal gain and the charity’s interests.

Loyalty conflicts

A loyalty conflict arises when a trustee’s duty to another person or organisation could interfere with their ability to make unbiased decisions for the charity. This isn’t about financial gain but rather competing loyalties.

For example:

A trustee of a community charity is also a local councilor. The charity is considering bidding for council funding, and the trustee’s council committee is responsible for approving grant allocations.

The Charity Commission have produced a short video to help you understand the importance of managing conflicts of interest

Read the Charity Commission guidance on conflicts of interest

Chairty Commission Guidance

Managing conflicts of interest

When do you need a policy?

The level of formality required for managing conflicts of interest depends on the size, income, and financial complexity of a voluntary sector organisation. Below is guidance on when a full policy is necessary versus when routine management within meetings may be sufficient.

1. Routine Conflict of Interest Management (For Small, Volunteer-Led Charities)

For smaller organisations with low income, minimal financial transactions, and fewer governance risks, conflicts of interest can often be managed effectively within meetings. For these purposes and simple statement can be sufficient to inform your trustees and stakeholders of your approach.

For example:

“As a small, volunteer-led organisation, we recognise the importance of transparency and integrity in decision-making. Trustees are required to declare any personal or financial interests at the start of each meeting. These are recorded in the minutes, and where necessary, trustees may be asked to withdraw from discussions and decisions where a conflict arises. We maintain a simple Register of Interests, updated annually and reviewed before key decisions.”

When This Approach Works Best:

• Small, informal charities with low financial risk
• Minimal financial transactions involving trustees or related parties
• Trustees meet regularly and can openly discuss conflicts as they arise

2. Full Conflict of Interest Policy (For Larger, Higher-Risk Charities)

For larger charities with higher incomes, multiple funding sources, paid staff, or complex financial transactions, a full policy ensures clear processes for identifying, managing, and recording conflicts.

When a Full Policy is Required:

• Charities with significant income (e.g., over £100,000)
• Those with paid staff, contracts, or complex financial dealings
• Where conflicts could impact funding, governance, or service delivery
• Where trustees have roles in multiple organisations with overlapping interests

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