The Charity Commission could end up footing the bill for interim managers appointed to two charities that are subject to statutory inquiries, including the Cup Trust tax-avoidance scheme.
The regulator last year appointed interim managers to run the Cup Trust, the tax-avoidance scheme that raised £176m in donations and claimed £46m in tax relief, but spent only £55,000 on charitable activities over two years, and the Dove Trust, which runs the suspended online donations platform CharityGiving.
Sam Younger, the chief executive of the commission, told the Public Accounts Committee last month that there had been two cases over the past year where the commission was meeting some of the cost of appointing an interim manager to a charity rather than the charity paying the bill, as is usually the case.
A spokeswoman for the commission has since told Third Sector that it had appointed Jonathan Burchfield, a partner at the law firm Stone King, as interim manager for the Cup Trust and agreed to indemnify the costs. This means the regulator will make up the shortfall between the interim manager's fee and the portion of it that the charity is able to pay.
It also appointed Pesh Framjee of Crowe Clark Whitehill as interim manager of the Dove Trust on an indemnity basis.
The spokeswoman said these were the only current cases in which the commission was providing an indemnity. She said she was unable to comment on why the commission was indemnifying the costs for the interim manager at the Cup Trust because the investigation was ongoing, but said it was "in the public interest" for it to do so.
She said an indemnity was necessary in the case of the Dove Trust to ensure that as much money as possible was returned to the charities from CharityGiving.
She said the power to appoint an interim manager on an indemnity basis was not new but used only in exceptional circumstances.
"The rationale for agreeing to provide an indemnity is that it is in the public interest to do so in the circumstances of the individual case," she said. "In these cases, it was agreed that it was necessary and appropriate to do so to ensure public trust and confidence in resolution of the issues in those cases.
"Both the inquiries mentioned above are live and remain ongoing and, as such, we are unable to provide further details on the specifics of the interim managers’ duties. It is usual for us to publish a report at the conclusion of an inquiry that would include detailed information on this."
The commission can appoint an interim manager to run a charity only after opening a statutory inquiry and if it believes there has been misconduct or mismanagement or if it feels it is necessary to protect the charity's property.
In October, Mountstar PTC, the corporate trustee of the Cup Trust, lost an appeal at the charity tribunal against the Charity Commission's decision to open a statutory inquiry and appoint an interim manager. The tribunal said the appointment of an interim manager was warranted pending the outcome of the statutory inquiry because Mountstar was "incapable of properly discharging its duties as charity trustee to the charity".
Last month, the commission applied to the High Court for a judgment on how to hand out the £500,000 available for initial distribution to 1,800 charities that had been collected through CharityGiving, run by the Dove Trust.
Its interim manager, Pesh Framjee, told the Charity Commission in the summer that there appeared to be a shortfall between the funds due to charities that had been donated through CharityGiving and the cash the trust held.