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On 1st April 2016 the Office of the Scottish Charity Regulator (OSCR) made some changes to the way it monitors charities in Scotland.  This note summarises the changes.

Notifiable Events

It has always been best practice to involve OSCR at an early stage if something goes wrong that has the potential to put the reputation of a charity at risk.  From 1 April 2016 OSCR will take a more formal approach and expect charities to report such incidents as a matter of good governance. 
Trustees are bound by duties of care contained in the Charities and Trustee Investment (Scotland) Act 2005 to act only in the best interests of the charity and not to allow their personal interests to conflict with those of the charity.  Therefore while there is no specific provision obliging them lodge a report, they should consider carefully whether or not to do so.

Although there will be no fixed list of “Events” for Trustees to refer to, future guidance is intended to reflect incidents reported to OSCR in practice.

Some examples which may need to be reported include:

  • Theft of charity funds or property;
  • Fraud either imposed on, or facilitated by, the charity;
  • Abuses of positions of trust, or physical or mental abuse of beneficiaries;
  • Money laundering, or suspicions of money laundering;
  • Any other criminal activity perpetuated by the charity or by employees or beneficiaries using the charity’s facilities or resources;
  • Sudden or unexpected losses of revenue; and/or
  • Serious or persistent failures to comply with regulatory requirements.

If Trustees decide to make a report, they should outline the situation and how it may impact on the charity and the steps being taken to resolve the situation.  OSCR will then determine whether they need to take any further action.

Where a criminal offence has been committed the crime reference number should also be noted down and reported.

New Annual Return Form

1 April 2016 also saw the launch of an amended Annual Return Form, with supplementary returns only being required for charities with income of more than £25,000 per year.  

The new form seeks to find out more about the internal workings of Scottish charities and broadly will ask:

  • Whether Trustees decisions were made in accordance with the charity’s Constitution and whether the Trustees have examined the Constitution generally over the past year;
  • Whether financial performance has been examined at least twice a year, whether cheque books are properly stored and whether payments are subject to multi-stage approval and whether tax and national insurance contributions have been paid on time; and
  • Whether more than 20% of the year’s income was received from a person “connected” to a charity Trustee.  Connected persons include spouses, children, siblings, parents or a company or partnership or business controlled by a Trustee; and

OSCR anticipates that the new forms will not significantly increase the administrative burden on charities and most charities may in fact have fewer questions to answer.

Publishing Accounts

1 April also brought an intention to publish charity Accounts on OSCR’s website for the first time, to be disclosed along with the other publicly available information contained in the Charity Register.  Initially OSCR intends to only publish Accounts for charities with income of over £25,000 per year and for all SCIOs, with sensitive personal information being redacted where appropriate.  

The measures being brought in are intended to provide greater transparency of Scottish charities in the hopes or sustaining and increasing public confidence in the charity sector.  Greater scrutiny of internal governance is not intended to dissuade potential or existing Trustees from being involved with charities, but is intended to help them avoid getting into difficulties in the future.

As ever, Trustees who take their duties seriously should have nothing to fear.

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