Charities suffer as trustees take quango shilling

SMALLER charities are struggling to find qualified volunteer trustees because desirable candidates are being lured to paid positions with quangos and corporations.

The dearth of top talent increasingly turns out to be the root problem when the Charities Commission investigates alleged conflict of interest, inappropriate spending or lack of investment expertise.

"Most of the charities that get into trouble are suffering from the limitations of amateur management," said Malcolm London, a senior partner at accountants Coopers & Lybrand and an expert on charity insolvency. "People who in the past would act as trustees because they're established - 'the Great and the Good' - now have the opportunity to work on quangos and get paid for it."

The Cadbury Committee's insistence that public companies should have non-executive directors is also draining the pool of potential trustees, leaving the smaller charities to choose second-rate candidates. "In many cases the trustees have no great understanding of the affairs of the charity," Mr London said.

About 900 of Britain's 170,000 registered charities are investigated by the commission each year. Typically a third of the allegations are substantiated, usually leading to replacement of the board with retired bureaucrats. Half-a-dozen have been forced into receivership since 1993.

While most problems referred to the commission involve conflict of interest or inappropriate spending, lack of investment experience can have expensive consequences. Trustees at the Salvation Army could come under fire in an imminent report from the Charity Commission on a complex investment scam that left it pounds 6m out of pocket.

Most trustees have little choice but to accept the advice they get. "The fund managers know so much more than the trustees," said Shirley Gillingham, executive secretary of the Charity Finance Directors Group, which last week set up an advisory forum on investment for members.

Executive staff, who tend to get lower pay than their counterparts in public companies and the civil service, are often of little help. At troubled charities they frequently get either too little supervision or too much, with a dominant trustee taking on the unofficial role of day-to-day managing director.

The Wellcome Trust, Britain's biggest, has no trouble filling vacancies on its board of governors because of the status the medical foundation confers, but Ian Macgregor, its finance director, said some of the smaller boards on which he sits were not so fortunate. "Even on the charities with pounds 1m budgets it's desperately hard to get people on to the board. The good ones are usually terribly busy," he said.