Expert view: Steering charities back on course

When governance breaks down, an outsider is appointed to get charities back on track.

Interim managers - or receivers and managers, as they used to be called - are appointed by the Charity Commission to deal with the property and affairs of charities when their internal governance has broken down. This is generally because trustees are at war with each other, have unmanageable conflicts of interest or have been misappropriating funds.

I have held four interim manager appointments. Interim managers are usually accountants or solicitors, and their role is to use their professional skills to put troubled charities back on track. There have been about 50 such appointments since 1993; some notable charities have been through this cathartic process and now provide good services. Inevitably, however, there are also some charities whose trustees are so dysfunctional or uncooperative that interim managers have little option but to wind up the organisation.

Interim management is a fascinating task. Interim managers become the decision-makers for charities, subject to any powers that, unusually, have been left in the hands of the trustees. The role also has an edge, because, apart from dealing with uncooperative trustees, interim managers also have to report regularly to the commission, which can remove them at the drop of a hat. The commission also decides, usually once every three months, whether to continue the appointment. This is important because interim mangers should be clear about what they are there for and should not be given carte blanche to run a charity for as long as they see fit.

Interim managers are usually appointed when trustee boards are wholly dysfunctional or the assets of a charity are significant and under threat. But sometimes the assets are not being used at all. For that reason, the figures on the commission's website showing how much money has been protected by the commission and interim managers should be taken with a pinch of salt.

Interim managers are selected by the commission from a pre-approved panel, usually after competitive tendering. Charities, which pay the fees, are sometimes concerned about the cost. The commission doesn't necessarily accept the lowest bid, but it usually asks candidates to cap fees at a certain level. It is a difficult situation because it is hard to assess a figure in advance, given the lack of available information.

The danger is that if circumstances require interim managers to provide a service beyond what they deem the fee to cover, they might lose interest or opt for a solution that is not necessarily the right one for the charity. It is possible for interim managers to argue that new issues have arisen after a fee has been agreed but, understandably, the commission is reluctant to increase it.

 - Michael King is head of charity and education at Stone King Sewell LLP

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