The Office of the Scottish Charity Regulator (OSCR) kick started their 12 week consultation process on targeted regulation in August, in a bid to increase transparency and reinforce public confidence in charities. Since its inception in 2006, OSCR has made little change to its operational policies and processes. The consultation proposals are based on OSCR’s experience over the past nine years and its ethos to strive to be a progressive, preventative and proportionate regulator.

The proposals are divided into four main categories and designed to encourage transparency for the public, ease reporting for charities and to ensure a more focused use of OSCR’s resources.

Annual return update

  • It is proposed that the annual return will be revised and contain information which will supplement the annual report and accounts. It is also suggested that the supplementary monitoring return for larger charities will be scrapped and replaced with additional sections contained in the annual return.
  • On the whole this change in annual reporting will not increase the questions asked of charities, and in many cases will be a reduction.
  • The proposed new questions include a focus on legal governance and training.
  • OSCR has reported a good uptake in its OSCR Online service since it was unveiled two years ago. The proposal is to drive towards 100% online filing.

Annual accounts and returns

  • With 81% of annual accounts now being compliant, and a further 12% receiving a qualified pass, OSCR feel they have now reached a point where they can re-focus their energies when reviewing annual accounts. Instead of reviewing each and every one of the 23,000 accounts received, OSCR propose to review a random sample and also a risk based sample (ie: all first submissions, charities which have had previous accounts issues and charities who have prompted a need for follow up based on information supplied in their annual return).
  • In line with current practice of the Charity Commission of England and Wales, this proposal also seeks to publish annual accounts. Given that the Charities and Trustee Investment (Scotland) Act 2005 does not oblige OSCR to publish annual accounts, data protection obligations mean that the accounts will be published with redacted information – removing signatures and address details.

Trustee database

  • Initially OSCR propose to collate a trustee database for internal purposes, with the ultimate aim of publishing charity trustee names (only) on the charity register. Given that trustee turnover is so high, the creation of a trustee data base seeks to support OSCR in areas such as (a) applications for charitable status eg: vetting proposed trustees, (b) non-submitting charities (c) suspension/disqualification and (d) supporting engagement.

Serious incident reporting (SIR)

  • SIR seeks to introduce a new system of reporting, through which charities must alert OSCR to matters that could result in damage to the charity itself and in turn damage to public trust and confidence in Scottish charities. OSCR have detailed 9 areas which may be considered reportable incidents, eg. fraud/theft, a link to a proscribed organisation or terrorist activity or lack of policy in place for safeguarding vulnerable beneficiaries.

It is clear that OSCR’s proposals seek to improve and streamline the regulation of Scottish charities in a positive way which will instil public confidence in the operation of our third sector. During the 12 week consultation OSCR have been gathering written submissions (and have received an unprecedented response) and hosting workshops across the country to engage the public, charity trustees, charity employees, community groups etc. Feedback from both a positive and negative perspective has been encouraged with the purpose of honing and improving the proposed regulatory changes, if thought fit. Everyone has a say when it comes to this consultation.

Whilst we await the evaluation report, which is expected to be published towards the end of 2014, charities, their advisors and the general public have time to reflect on the effective regulation and operation of Scotland’s charities. The consistent message through the consultation proposals is that OSCR is seeking to encourage a sense of self-reflection in the operation of charities and their board of trustees. Indeed the suggested changes to annual reporting seem to complement the introduction of the new charities accounting statement of recommended practice (SORP) in 2015. OSCR already publish very helpful guidance on annual accounts, and in particular the trustees’ report, which will be a key source of support for charities preparing their first set of accounts in line with the new SORP in 2015/16.

Questions are aimed to prompt charity trustees and their members to review their operational manual (the constitution, articles of association or trust deed) and to consider whether they are maximising the true potential of the charity. Indeed, do their charitable proposes match what the charity seeks to do in today’s society? Is structured training provided to charity trustees on topics such as legal duties, management of conflicts, financial issues or equality/diversity? These questions, amongst others, seek to promote effective management of the charity and ultimately improve the provision of tangible public benefit.

When it comes to the holding of personal trustee data and the publication of trustee names OSCR is seeking to promote a clear ethos of accountability and transparency. It will also assist OSCR’s communication channels with charity trustees and charities. A robust framework to capture and hold this information will be required to be put in place. Like the Charity Commission south of the border, OSCR has suggested that there will be exception for publication of names which have protected characteristics in line with current equality legislation.

The consultation papers suggest that SIR will be an avenue for charities to report serious incidents, which will assist in OSCR’s investigation of such actions, working in tandem with other authorities if necessary. This is a steer towards rectifying incidents which may cause potential damage to charities and in turn damage to public trust and confidence in charities. The nine areas highlighted by OSCR which would constitute a serious incident are likely to require further clarification but seek to address areas of serious concern in OSCR’s previous experience.

OSCR’s board will be considering the evaluated feedback on the consultation in mid-November after which OSCR will seek to publish their report. Any changes made as a result of the consultation will be widely communicated and publicised by OSCR.

For more information on the consultation, please contact our charities team – Christine O’Neill, Brenda Scott, Eric Galbraith, Alan Eccles, Paul McMahon, Helen Nelson or Ruth Saunders.

You can now also follow our new charity law updates at @BCharitable on Twitter.

Helen Kidd

Associate at Brodies LLP
Helen is a Associate in our Personal & Family team. She specialises in charity law matters, providing governance and legal advice to charities and other third sector organisations, individuals and companies, such as family foundations, housing associations, community groups, social care providers, museums and culture bodies and sports organisations.In addition to, and often alongside, charities and philanthropic work, Helen also has wide experience in dealing with family and related business succession planning, trust law advice, preparation of Wills and Powers of Attorney and executry (probate) administration.
Helen Kidd