Clearly there is a risk of conflicts of interest with trustees making decisions re grant applications from people who they know and especially if those people are their friends, foes, lovers or former lovers. But in a relatively small community it is difficult to set up processes that let trustees be trustees without having people decide on their friends' applications for grants and expenses.

Difficult, but necessary and not impossible.  I would suggest trying out some or all of the following tried and trusted techniques:

  1. 7 is a small board, it should be perfectly possible to have a larger board with three "independents" perhaps recruited from non-editing donors. Those three could then constitute a small grants panel with delegated authority to decide which individuals get certain sums that the whole board has budgeted for and set the criteria for.
  2. Delegate some of the individual decisions to officers. So the Board decides how much money to spend on sending people to Wikimania and what criteria the officers should look for, and the staff then decide who gets the grants.
  3. Anonymise/pseudonymise the grant applications. In some circumstances it should be possible for the board to consider applications and proposals with the applicant's identity redacted. Of course there would still be times when a board member recuses because they recognise the application as one that a friend discussed with them at a meetup. It might sometimes also be appropriate for the officers to add that the particular applicant had a successful or unsuccessful previous record of delivering similar projects.
  4. Have people recuse from decisions where they know that their lovers, close friends or indeed enemies are applicants. Friendship is a difficult thing to define and something of a sliding scale from an acquaintance whose application you could consider dispassionately to a close friend where you know you can't be neutral. I agree that Tango's test is a good one - if you know you are conflicted then you are. But you also need to consider the proverbial passenger on the Clapham Omnibus, and all trustees need to regularly ask themselves, "would a reasonable person think that I had a conflict of interest?".

WSC