Charitable trusts that make grants occupy an unusual position in New Zealand's civil society. They hold resources that are not owned by their trustees — resources that are held for the public benefit in accordance with a charitable purpose. The trustees' job is to deploy those resources in ways that serve the trust's charitable purposes, and to account for that deployment honestly.
Most trustee training focuses on the first obligation — what the trust is for, how to make good grant decisions. Less attention is paid to the second — what good grantmaking governance looks like, what the Charities Commission expects, and what happens when governance falls short.
Trustees are accountable in multiple directions:
To the trust deed. The trust deed specifies the charitable purposes for which the trust was established. All grants must be consistent with those purposes. A trust established to support "the advancement of education in the Canterbury region" cannot make grants to Wellington-based environmental organisations, however worthy. Departures from the trust deed — even well-intentioned ones — are a breach of trustees' obligations.
To the Charities Act 2005. The Act creates obligations around registration, annual reporting, and maintaining charitable status. Trusts that fail to file annual returns, that allow their registration to lapse, or that make distributions for purposes that are not charitable lose their tax exemptions and may face regulatory consequences.
To the Charities Commission. The Commission can investigate complaints about how a trust's funds are being managed. It can require information, conduct investigations, and in serious cases deregister a trust or apply to court for intervention. Commission scrutiny is most likely in cases of misuse, serious governance failures, or significant conflicts of interest among trustees.
To the public. Charitable trusts benefit from tax concessions that are justified by their contribution to public benefit. There is a public interest in how this money is used, and trustees are implicitly accountable to the public through their governance obligations.
The trust deed is the most important document in a charitable trust's governance. Trustees who have not read it carefully are not equipped to govern the trust effectively.
The trust deed typically specifies:
- The charitable purposes (what the trust is for)
- The geographic scope (what communities or regions the trust serves)
- Who can apply and what they can apply for
- How trustees are appointed and how long they serve
- How decisions are made (what quorum is required, who can vote)
- What conflicts of interest disqualify a trustee from participating
Some trust deeds are old and contain language that has become ambiguous or that addresses circumstances the founders did not anticipate. Trustees who encounter a situation the deed does not clearly address should seek legal advice rather than improvising. An improvised interpretation of a trust deed that later turns out to be wrong has consequences.
Charitable trust grantmaking is particularly vulnerable to conflicts of interest, because trustees are often appointed from within the communities and sectors the trust serves. A community foundation with trustees who are sector leaders will have trustees who have relationships with many potential applicants.
The Charities Act and the trust deed typically require trustees to declare conflicts and abstain from voting on decisions where they have a conflict. But "conflict" needs to be defined clearly enough to be applied consistently.
A trustee who is on the board of an applicant organisation has a clear conflict. A trustee who has a family member who works for an applicant has a clear conflict. A trustee who is a close friend of the applicant's CEO has a less clear conflict that may still require declaration. A trustee who has a professional relationship with the applicant (a lawyer whose firm acts for an applicant) has a conflict that is real even if not obvious.
For trusts where conflicts are common — because trustees are sector insiders — the governance response is to have a clear, written COI policy that covers all of these situations, a structured declaration process, and a practice of erring toward declaration rather than assuming that a relationship is not a conflict.
Grant decisions are governance decisions, not administrative ones. Trustees — not staff — are responsible for grant decisions, either directly or through delegated authority with appropriate oversight.
The trustee meeting at which grants are decided should:
- Have a quorum as specified in the trust deed
- Review applications and assessment summaries, not simply rubber-stamp staff recommendations
- Record the decisions made and the basis for them in the minutes
- Document any conflicts declared and how they were managed
Trustees who do not read application materials before the meeting, who delegate decision-making entirely to staff without governance oversight, or who do not minute their decisions are not meeting their governance obligations.
Delegation of smaller grants to staff is appropriate and efficient. But the delegation framework — what can be decided at what level, with what oversight — needs to be approved by trustees, documented, and periodically reviewed.
Charitable trusts registered with the Charities Commission must file annual reports. The annual report includes:
- Financial statements (audited or reviewed, depending on the trust's size)
- An annual report narrative covering the trust's activities and how they served charitable purposes
- Governance information (trustee details, remuneration)
The annual report is a public document. It is the primary accountability mechanism through which the public can see how a charitable trust's resources were used. Trusts that file late, that provide minimal information in their narrative reporting, or whose financial statements do not accurately reflect grant activity are failing a basic accountability obligation.
Many charitable trusts treat annual reporting as a compliance obligation to be minimised. Better-practice trusts treat it as an opportunity to be transparent about their grantmaking — publishing detailed information about who received grants, for what, and with what outcomes.
For charitable trustees and trust administrators looking to improve their grantmaking governance, the community foundations and trusts solution page covers how Tahua supports structured, auditable grantmaking for charitable trusts. To discuss your governance and documentation requirements.
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