In the interim...

Third Sector has found that £2.5m was spent on interim manager fees in cases that concluded between 2011 and 2016. Liam Kay asks if this is too much

The appointment of an interim manager by the Charity Commission usually happens when there exists a significant risk to charitable assets, income, services or the charity's beneficiaries. For example, an interim manager was appointed to Muslim Aid last year because of concerns about its governance, and the debt counselling charity the Rav Chesed Trust was given an interim manager this year as part of an inquiry into its financial management.

But an interim manager can come at considerable cost to the charity, which under charity law is required to pay the fees of the lawyer or accountant who has been appointed. Research by Third Sector found that about £2.5m was spent by charities on interim managers' fees in cases that were concluded between 2011 and 2016, according to Charity Commission records. The commission says that a large portion of that figure relates to a case in which a charity was placed in liquidation. A further 16 cases are continuing and are not included in the figures.

Cases can last a long time. One of the most recent case reports from the commission says that the interim manager for the religious charity St Stephen the Great was paid £259,218 for work carried out between their appointment in 2009 and the publication of the statutory inquiry report in August 2016. In another case, the interim manager for Astonbrook Housing Association earned almost £1.7m between 2007 and 2013.

Data from the commission shows that, of the 16 interim managers in post at 12 October 2017, six had been in the role for more than three years and five for a year or less. The commission says that in some cases appointments last for several years while legal or criminal issues are dealt with.

London church

The south London evangelical Christian church Rhema Church London has had an interim manager in place since December 2015, after a statutory inquiry was opened earlier that year because of allegations that it could not account for more than £280,000 of expenditure. Almost two years on, a group of members of the charity claims that Rhema Church London has paid its interim manager more than £150,000.

In September 2017, some members of the church complained to the Charity Commission about the costs. In a statement at the time, the regulator said it recognised that some of the recent events had been frustrating for congregation members and it planned to send a representative to meet them to discuss the issues facing the charity. The commission has policies and procedures in place to stop costs spiralling out of control. When an interim manager position comes up, a bidding process begins, involving law and accountancy firms on the commission's 40-strong list of approved interim managers. The bidding companies are usually provided with an outline of the facts without the charity being identified.

The commission supervises serving interim managers to ensure they operate in the charity's best interests, and the regulator will make decisions on how much remuneration the interim manager can draw from the charity. Interim managers are also required to report regularly on their work.

Charities can challenge the costs of interim managers by complaining to the commission, and they can appeal the appointment of interim managers through the commission's decision-review process or the first-tier tribunal.

"The costs and the length of an interim manager appointment will reflect the nature and complexity of the issues in the case," the commission says in a statement. "Sometimes the appointments take longer than originally anticipated due to this. However, the commission is always mindful of the impact on the charity and its finances and will not seek to delay or continue an appointment where it is no longer an effective option."

Many assignments within a particular case involve pro-bono work, and the commission expects the entirety of the work to be completed at a discounted rate, which the commission says can be up to 50 per cent less than usual.

Harvey Grenville, head of investigations and enforcement at the commission, says it has "a rigorous process for appointing and overseeing the work of interim managers".

Michael King, a partner at the law firm Stone King, has been an interim manager for seven charities over the years and is the current interim manager at Muslim Aid. He says the work itself is what drives his firm's desire to bid for interim manager positions, rather than the money involved.

"We enjoy the whole idea of going into a charity and trying to sort it out," says King. "That's the real buzz it gives me. It's not the money, frankly. Of course we earn money from working for charities, and of course we charge.

"I don't think we would go into it just for the money. I think we go into it because it is something we enjoy doing."

Muslim Aid says in a statement that it is "very grateful" for the work done by King while acting as interim manager.

The competitive nature of bidding for interim manager roles prevents the price spiralling. King says that no interim manager would want to force a charity out of business by charging too much. "We work for charities because we like charities, and we don't want to see them go bust," he says. "If a charity's worth saving, we try to save it.

"There is a balance to be struck between how much you are interested in the job, how much you can do the work efficiently and what the charity is able to afford."

But not all agree that this is generally the case. In a statement to Third Sector, some members of Rhema Church say: "Interim manager fees are extortionate, especially because the quality and timeliness of their work is questionable. Small and medium charities are suffering, and hundreds of thousands are being paid into this money-making scheme at the expense of donors."

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Already registered?
Sign in
RSS Feed

Third Sector Insight

Sponsored webcasts, surveys and expert reports from Third Sector partners