Publication - Research and analysis

Scottish charity law: consultation analysis

Published: 2 Jul 2019
Directorate:
Local Government and Communities Directorate
Part of:
Research
ISBN:
9781787819801

This report presents analysis of the consultation on Scottish charity law which ran from January to April 2019.

76 page PDF

695.8 kB

76 page PDF

695.8 kB

Contents
Scottish charity law: consultation analysis
Executive Summary

76 page PDF

695.8 kB

Executive Summary

This Executive Summary presents the main messages arising from the Consultation on Scottish Charity Law.

Scotland has a resilient, diverse and innovative charity sector.  There are over 24,000 charities on the Scottish Charity Register, from grassroots sport and youth clubs, to health and social care providers, to national museums and galleries.  Charities touch on almost every aspect of our day-to-day lives.  Charities also play a prominent role at a national level - bringing expertise, insight and challenge to national policy development and implementation.

It is now over 13 years since the introduction of the Charities and Trustee Investment (Scotland) Act 2005 (the 2005 Act), which established the current regulatory framework.  Over this time OSCR has shown its commitment to regulating in a pragmatic and proportionate way, balancing a widely preventative approach with strict enforcement where necessary.  Consequently, OSCR has built up considerable learning about the framework, and in line with its general statutory function to advise or make proposals to the Scottish Ministers on matters relating to its statutory functions, has proposed areas where the 2005 Act could be improved to better serve the public and charities, with a focus on increasing transparency, accountability and trust.  OSCR’s specific proposals were outlined in “A proposal for Modernisation of the Charities and Trustee Investment (Scotland) Act 2005"[1].

In light of OSCR’s proposals and wider stakeholder views, the Scottish Government ran the consultation to consider and consult on possible updates to the legislation.  Views were sought from members of the public, the charity sector, and anyone with an interest in charity law.  The focus was to learn from the expertise and experience of others, and to hear first-hand about what really makes an impact on levels of public trust and confidence.

In total 307 responses were received to the Consultation on Scottish Charity Law, broken down by individuals and organisations in Table 1

Table 1: Profile of Consultation Respondents

Number Percentage
Individuals 127 41%
Organisations 180 59%
Total  307 100%

Table 2: Summary Analysis Table

Questions Assessment of Feedback    Main Comments For and/or Against
Section 1 - Publishing annual reports and accounts in full for all charities on the Scottish Charity Register
Q1 - On the Scottish Charity Register, should OSCR be able to publish charity annual reports and accounts in full for all charities? Vast majority supportive
  • In the best interests of strengthening transparency and building public confidence and trust in the sector.
  • Open, direct and easier access to information is a good thing.
  • It would lead to increased scrutiny, accountability, and openness of charities to the public and other interested parties (e.g. funders).
  • This information is already publicly available or direct requests can be made to charities.
Q2 - Do you think there is any information in charity annual reports and accounts that should not be published on the Scottish Charity Register?
Majority  answered “No”  – but wider feedback mixed 
  • Full disclosure and transparency is important.  As is building and maintaining strong levels of public confidence and trust.
  • Redaction can undermine transparency.  
  • Accounts would be more user-friendly if not redacted.
  • But privacy is also paramount (e.g. sensitive personal information, charities involved in sensitive areas, to prevent fraudulent use).
  • Publishing in full should be the default position – however, there would require to be some exceptions to the rule.
Q3 - Do you think charities should be allowed to apply for a dispensation from having their annual reports and accounts published in full on the Scottish Charity Register? Majority not supportive – but wider feedback mixed
  • All charities should be open to public scrutiny.
  • Dispensations could undermine public confidence and trust in the sector.
  • Dispensations to be agreed in exceptional circumstances only.
  • Concerns relating to no dispensations were largely linked to risks around publishing sensitive personal information, the risk of violence, abuse, intimidation, and unwelcome exposure, and that it might deter people from becoming a trustee.
Questions Assessment of Feedback      Main Comments For and Against
Section 2 - An internal database and external register of charity trustees
Q4 - Should OSCR be able to collect the trustee information for use in an internal database? Vast majority supportive
  • It would increase public confidence in the governance of charities.
  • It would increase transparency and openness of the sector.
  • It would support effective regulation.
  • It would reduce fraudulent behavior within charities or mismanagement.
  • Some process-related concerns were raised (e.g. data protection, cost of maintaining the database, keeping information up-to-date, administrative burden for smaller charities and OSCR). 
Q5 - Should the names of trustees be published on the external public register? Majority supportive
  • As above – it would support increased transparency, trust, etc.
  • Public have a right to know who is involved in running charities.
  • Some process-related concerns were raised (e.g. data protection, right to apply for a dispensation, it might put trustees at risk and/or discourage others from applying to become a trustee).
  • Some calls for greater clarity on the purpose of developing the external register (and internal database), and more detail required regarding how proposals would be implemented and work in practice.
  • The need for appropriate safeguards to prevent any data breaches.
Q6 - Should the names of trustees who have been removed following an inquiry by OSCR, be published on the external public register? Vast majority supportive
  • As above – it would support increased transparency, trust, etc.
  • It would support charities in undertaking due diligence activities.
  • Wider points – separate register required, it should be time-limited (in most cases), context about the decision, care to avoid mistaken identity. 
Q7 - Do you think trustees should be allowed to apply for a dispensation from having their name published on the external public register? Majority supportive
  • The publication of trustee names should be the default position, and dispensations should be by exception - case-by-case basis.
  • There might be a limited and specific set of legitimate circumstances where an exemption should be granted.  For example, in instances where disclosure could put a trustee (and/or their family) at risk of unwelcome exposure from a health, safety or security perspective, for charities operating in sensitive areas, etc.
  • OSCR would need to clearly define the parameters where a dispensation might be applied for.
Questions Assessment of Feedback      Main Comments For and Against
Section 3 - Criteria for automatic disqualification of charity trustees and individuals employed in senior management positions in charities
Q8 - Should the criteria for disqualification and removal of charity trustees be extended to match the criteria in England and Wales? Vast majority supportive
  • The proposals (Q8 and Q9) appear reasonable and comprehensive, and aimed at excluding those whose behaviour was unfit for leading a charity.
  • Aiding consistency between different jurisdictions made sense – important to make sure that a disbarred trustee of one charity was not able to take up a leadership role within another charity.
  • It would afford greater transparency, professionalism, and integrity across the charity sector.
  • It would help maintain and increase public confidence and trust in the sector, and protect charities from the risk of abuse.
  • Some concerns raised about the implications that the application of rigid criteria might have on charities working in sensitive areas.  For example, ex-offenders recruited by charities as trustees (or staff).
  • For some, it was felt that more detail would be required to set the parameters of the proposed alignment (Q8 and Q9).
Q9 - Should the criteria for disqualification and removal also be extended to those in certain senior management positions? Vast majority supportive
  • Some of the points raised in Q8 are also relevant to this question.
  • Senior managers (and trustees) hold positions of public trust – important that all positions of responsibility are covered in any extension of criteria.
  • Need to define what is meant by “senior management”, and for small charities with few or no staff.
Questions Assessment of Feedback       Main Comments For and Against
Section 4 - A power to issue positive directions to charities
Q10 - Should OSCR be given a power to issue positive directions? Vast majority supportive
  • It would provide OSCR with stronger powers to intervene and enforce in instances where charities were not adhering to its legal obligations.
  • It would protect the reputation of the sector and safeguard charitable assets.
  • It would safeguard and enhance public (and donor) confidence and trust.
  • It would improve the reputation and credibility of the sector.
  • Support for a cautious and sparing approach – use of such powers in exceptional circumstances was supported.
  • Charities would need to have sufficient opportunity, time and support to comply with any positive direction.
  • Some concerns raised about the additional burden for smaller charities.
Q11 - Should a power to issue positive directions be wide ranging or a specific power? Majority supportive of wide ranging power – but wider feedback mixed
  • Support for a wide ranging power – it would be difficult for OSCR to list in legislation all the circumstances in which it might be needed and/or be impossible for the legislation to correctly envisage the different situations in which it might be needed.
  • Support for a specific power – OSCR should only intervene on aspects specific to the governance of charities, rather than having power to issue positive directions relating to the day-to-day operational management of charities.  The importance of protecting and maintaining a charity’s independence from the public sector was emphasised. 

Q12 - If a charity failed to comply with a positive direction that OSCR had issued, should this be classed as trustee misconduct? Majority supportive – but wider feedback mixed
  • Supportive overall, but the main feedback was that it should not be automatically classed as misconduct.
  • There would require to be a full inquiry or investigation – including to identify any potential mitigating factors.  Each case should be considered on its own merits. 
  • The importance of having a fair and effective rights to appeal process was raised.
Questions Assessment of Feedback      Main Comments For and Against
Section 5 - Removal of charities from the Scottish Charity Register that are persistently failing to submit annual reports and accounts and may no longer exist
Q13 - Should OSCR be able to remove charities from the Scottish Charity Register if they have persistently failed to submit annual reports and accounts? Vast majority supportive
  • The submission and publication of annual reports/accounts were vitally important to improving transparency and accountability of the sector.  It also helps safeguard and build public/donor/stakeholder trust and confidence in charities, and in charity regulation.
  • OSCR would need to exhaust all possibilities of identifying and locating trustees to remind them of their responsibilities prior to removal.  If confirmed that the charity has ceased to exist or was no longer operating, then removal from the Scottish Charity Register was considered appropriate.
  • “Persistently” would need to be further defined.
Q14 - Should OSCR be given a positive power of direction to direct a charity to prepare annual reports and accounts? Vast majority supportive
  • Action taken by OSCR to drive up levels of compliance was supported.
  • The importance of charities’ demonstrating where charitable funds came from, how charitable funds were spent, and public benefit provided were emphasised. 
  • It was considered reasonable for OSCR to have a range of appropriate powers that it could use where charities were ignoring their legal duty.






Q15 - If a charity failed to comply with a positive direction to prepare annual reports and accounts, do you think this should be classed as trustee misconduct? Majority supportive
  • The general consensus was that there should be consequences for charities who persistently failed to submit annual reports and accounts, and for OSCR to have powers to implement sanctions/enforcement actions.
  • But – it should not be assumed to be trustee misconduct, and attempts should be made to resolve the issue in the first instance.  
  • Any non-compliance would need to be investigated before being classed as misconduct, including consideration of any mitigating factors.
  • The importance of a supportive and preventative regulatory approach was emphasised – some charities might need support to get back on track, etc.  Action taken by OSCR should be appropriate and proportionate.
Questions Assessment of Feedback  Main Comments For and Against
Section 6 - All charities in the Scottish Charity Register to have and retain a connection in Scotland
Q17[2] - Should all charities registered in Scotland be required to have and retain a connection with Scotland? Vast majority supportive
  • A reasonable proposition that OSCR’s remit should only extent to charities whose activities were at least partly carried out in Scotland.
  • Plus the public would likely assume that a charity which appeared on the Scottish Charity Register would have a connection with Scotland – if not, this was felt to be potentially misleading.
  • It would support more effective regulatory function and oversight by OSCR.
  • It would strengthen transparency, accountability and credibility of the sector.
  • “Have and retain a connection” would need to be further defined – strong support for a sufficiently broad definition.
  • Some concerns raised around the potential that some cross-border charities would lose OSCR registration due to a lack of a physical base in Scotland.








Section 7 - Inquiries into the former charity trustees of bodies which have ceased to exist and bodies which are no longer charities
Q18 - Should OSCR be able to make inquiries into former trustees of a body which is no longer a charity, a charity which has ceased to exist and individuals who were in management and control of a body which is no longer controlled by a charity? Vast majority supportive
  • The granting of such a power was considered prudent, conducive to effective regulation, and it would strengthen current legislation.
  • Important for OSCR to have sufficient powers at its disposal and greater scope to investigate potential wrong-doing and misconduct, and to take appropriate enforcement action(s) where required.
  • Key to supporting the integrity of the charity sector in Scotland.
  • It would strengthen transparency and accountability, and protect charitable assets.
  • There would need to be a transparent process put in place, including clear articulation of the conditions under which this power could be used.
  • Some concerns were raised that OSCR could undertake inquiries “on a whim”.  Others felt that in some cases other agencies might be better placed to undertake inquiries (e.g. Police, Home Office).
Questions Assessment of Feedback  Main Comments For and Against
Section 8 - De-registered charities’ assets and public benefit
Q19 - Should bodies that have de-registered as charities be required to continue to use the assets held at the time of removal from the Scottish Charity Register to provide public benefit? Majority supportive
  • Strong support for such assets to be used for public benefit and not for private gain - inherent duty or obligation to safeguard charitable assets.
  • Should continue to be used for the intended charitable purpose(s) – or as close as is possible to those for which they were given – otherwise this would be misleading to the public/donors.
  • The potential to transfer assets to another charity with similar aims and objectives was supported.
  • Some terms would need to be further defined – “assets” and “public benefit”.
  • Some concerns were raised regarding complexities and challenges for long-established charities with assets acquired prior to the 2005 Act.
Section 9 - The speed and efficiency of OSCR’s powers to gather information when making inquiries
Q20 - Should OSCR be given the power to give the required notice of a request for information to a body or individual that is misrepresenting themselves as a charity, that is no longer charity, and to former trustees of a charity which has ceased to exist? Vast majority supportive
  • It was considered important that OSCR has effective powers of investigation, and could undertake inquiries in a timely fashion.
  • The granting of such a power was felt to be in the best interests of strengthening transparency and accountability of the charity sector.
  • It would also provide public reassurance and build trust and confidence.
  • It would support more effective charity regulation, and protect the sector’s reputation and integrity.
  • There would need to be clear parameters set for the use of this power – and that use should be subject to a public interest test.
Q21 - Should it be clarified that the notice periods to charities that are subject to a request for information can overlap? Vast majority supportive 
  • There was strong support for strengthening current legislation and/or addressing any perceived ambiguity in the way notice periods were presented – either through the issuing of guidance to provide clarity, or by amending the legislation.
  • The importance of ensuring a streamlined, effective and efficient process was emphasised – and making the process as clear as possible for all parties involved (e.g. to avoid any unnecessary delays, confusion, or misunderstanding).
Questions Assessment of Feedback  Main Comments For and Against
Section 10 - The reorganisation of charities established under royal charter, warrant or enactment
Q22 - Should the legislation be clarified to make clear whether OSCR can approve reorganisation schemes for certain charities that have been established by royal charter, warrant or enactment? Vast majority supportive 
  • Clarifying the legislation and removing any ambiguity would be a good thing.
  • There was considered merit in simplifying, streamlining, and modernising this aspect of charity regulation.
  • It was recognised that the reorganisation of such charities could be complex, costly in terms of legal fees, and time consuming.  As such, there was strong support for the proposal as it would potentially save these charities time and money.
  • It would provide a simpler route for organisations wishing to modernise their aims and objectives.
  • However, it was considered important that such charities “retain and respect their long and privileged connections” with, for example, the Scottish Parliament or Privy Council, and that any changes might undermine existing legislative frameworks and processes.
Wider Issues

Wider issues raised through the consultation are documented in the main report.

Contact

Email: Jacqueline.rae@gov.scot