The Chartered Institute of Public Relations (CIPR) has hit the headlines in recent weeks after it reported that it expects to make a loss of £700,000 this year.

I caught up with President Kevin Taylor this morning to talk about its trading position, the future of professional membership organisations as communities assemble online, the move to Russell Square and the three-year plan to put the Institute on a firmer footing.

Q: On what financial basis does the CIPR continue to operate (based on £336,000 net assets at the end of 2008 less £700,000 reported losses)?

What you have to understand is that the loss we are likely to report is not all in cash terms. We are currently enjoying a long rent free period on our property at Russell Square: this means that since the summer there has been no physical payment of rent at all. However, we needed to show a share of the total rent due over a five year period in our 2009 profit and loss account.

Our professional advisers, accountants Chantrey Vellacott, are happy that the Institute is a viable going concern. We are, of course, keeping a strict eye on our cash flow.

Q: What is the plan to put the CIPR back on a firmer financial footing?

There are a number of processes ongoing and concurrent.

Firstly, from an income point of view, there is a three-year business plan in production which is involving wide consultation with senior practitioners, members, volunteers and of course, the Council and Executive Board.

This plan is wide ranging. It will review – among many things – the future of the membership model in a world where communities are increasingly gathering online. We want to build a best practice CIPR for the digital era. This work had started before the extent of the financial situation had fully emerged.

Secondly, and – as I said – this is taking place in parallel, there is a structural review of the Institute itself. Again, we are drawing on senior help from outside the current Board and taking a root and branch review of the staff structure required to support the member services and the most valuable trading areas.

Of course these two reviews will interlink so that the structure supports the plan.

Finally, there is the final stages of a Governance Review which I initiated at the start of the year. This looks at the fundamentals such as Board requirements and duties, financial responsibility and national, regional and sectoral committees and group accounting arrangements.

Q: How did the Institute find itself liable for such a substantial property termination cost (1.5 x net assets) with no apparent safety net?

This question – or variants of it – is the one I am constantly asked and I am pleased to have another chance to explain. I shall do so at length, for which I apologise, but it is important that people understand the whole story.

Firstly, the CIPR never entered – at any stage – into a rental agreement lease with Mr Kallakis, the “property tycoon” whose companies are at the centre of a serious fraud office investigation.

The CIPR originally leased the property in 32 St James’s Square from a company acting as managing landlords for a long-standing reputable British company.

However, as the lease approached the beginning of its final year, the company concerned sold 32 St James’s Square to one of Mr Kallakis’ companies.

Shortly afterwards, our new landlord applied for and obtained planning permission to turn the property back into a private residence and served us a legal notice to quit. At that stage he also agreed to pay us the required statutory compensation, to waive our rent if we vacated before the end of our lease, and also to forego a dilapidations claim at the end of the rent period because of the building works he was planning.

We began our property search and found in Russell Square the ideal building. It offered more usable space, a long lease with established London land-owner Bedford Estates, and a rent that was comparable with 32 St James’s Square.

We therefore agreed to take over Russell Square and negotiated a long rent-free period.

Unfortunately, that’s when things started to go awry. Firstly, the Bank repossessed 32 St James’s Square and other properties owned by the same company. We now had our third, and final, landlord.

The new landlord was not obliged to honour the terms we had been offered and therefore we paid rent on 32 St James’s Square until the end of the lease in July. Because we are rightly accounting for the rent at Russell Square as well, that effectively doubled our rent outgoings in the annual profit and loss account for seven months.

Further, we faced a six-figure bill for dilapidations on 32 St James’s Square. After tough negotiations we reduced this but it contributed to exceptional one-off property costs that amounted to more than £500,000.

Further, our original deposit on 32 St James’s Square – £125,000 – is yet to be returned. We are working hard with our legal advisors to recover this money.

I look back, as a Board member and elected Officer of the Institute these past two years, and honestly believe that at every step of the way we took the right decision based on the evidence available. It hurts me, and of course I fervently wish it hadn’t happened on my watch, but it has and what matters now is what we are doing to put matters right and restore the CIPR’s finances.

Q: What action has been taken to halt trading losses during 2009?

We have instituted a series of immediate cost saving measures across the board, including personnel, which we considered could be implemented with minimum effect on member services and our trading programme. As you will expect, services to our members remain our priority.

Q: Has a fund raise from members been considered? This is a tactic that has been used previously by professional trade organisations in similar circumstances.

We considered raising our membership fees this year but decided to hold fees and work hard at member retention and growth. Our membership is still growing and I firmly believe that initiatives such as the Chartered Practitioner scheme will enhance the standing of the Institute and of membership.

Q: Any other points you want to make?

Yes – being on the receiving end of the story is a salutary experience for a PR professional. I have not been short of advice – before and afterwards – about how to handle this situation.

By and large, I’m happy with what we have done. We were proactive with the bad news at the start, we’ve taken every opportunity to explain the situation and I have written or responded to every member that has asked questions.

We have had praise for the way we have acted in difficult circumstances and understandable criticism as well. But even within the criticism, one thing has been plentiful: goodwill towards the organisation. And that offers me hope for the future.