JA: There are a number of factors to consider, including ensuring a fair and representative appointments process; transparency regarding any potential conflicts of interest; the contract of engagement; and taking up references. In your experience, Nigel, what would you consider to be the areas that are commonly overlooked by charity trustees when appointing advisers? How can these omissions be addressed?
NS: The place to start is defining what the charity wants from advisers. If a specification remains from last time, does it need to be updated? If not, should one be drawn up? The specification will vary according to the type of adviser - for example, a solicitor or an auditor - and advisers might have standard specifications of their own.
Regarding a representative appointments process, do you advertise in the media? How do you judge whether you are trawling widely enough, balancing that against the time constraints of being able to sift only a manageable number of applicants?
JA: On the point of advisers' standard specifications, trustees need to be alert to this and ensure the specification is tailored to meet their expectations. There could be an interesting dialogue about this point between trustees and advisers. Regarding conflicts of interest and ensuring a representative appointments process, a trustee might have a connection to one of the shortlisted advisers. Disclosure and transparency is the usual route to deal with these matters, but would you say there any definite no-nos for charities in this respect?
NS: There certainly are. A trustee who is a shareholder or has a salaried role in a prospective adviser's firm has a clear conflict of interest. This is not handled by a mere declaration and transparent procedures. They must withdraw from the selection process and leave it to the other trustees, because if the firm was awarded the contract, they would be benefiting personally from the charity's funds. There might well be declarable conflicts of interest when their firm's reports were discussed, and Charity Commission advice might be needed if the other trustees are convinced the best interests of the charity would be served by appointing their firm.
JA: Once the appointment has been made, and particularly if the adviser has been in place for a period of time, how can the trustees ensure they continue to receive useful advice and value for money? This is important for charities that are often run leanly with little slack in the budget. And how can the trustees safely challenge the expert without feeling exposed? I also think trustees should beware the temptation to resolve problems by using professional advisers, where it would be better to offer guidance and support for management and staff from within the organisation.
NS: The duty of trustees is to judge when they need advice and, if they decide that they do, to obtain and consider the advice, not just obey it automatically. They should not be shy about asking their adviser to justify and explain the advice rather than just hand it out. They might find it useful to ask "how can we achieve X?" rather than "can we do X?" or "is there any objection to our doing X?" They ought to read documents they are asked to sign and ask for explanations in everyday language of anything they don't understand. I think that a period for reviewing an adviser's appointment should be agreed at the outset - that way, they know they are not there forever, but they are not in danger of being removed peremptorily, should they give unwelcome advice. This gives trustees a chance to review what they think of the adviser separately from the pressures of any particular event, and to renegotiate fees.
JA: In conclusion, I would say that the external adviser relationship has to be carefully managed to ensure that they deliver what is expected in the initial brief and in accordance with their engagement agreement.
At all stages in the engagement - appointment, ongoing communications and reporting, and review - there should be a thorough process in place to provide clarity for all parties.
Jean Appleyard is treasurer of National Voices, a coalition of health and social care charities, and group finance director of an investment advisory firm