Scottish charity law: consultation analysis

Section 1

Publishing annual reports and accounts in full for all charities on the Scottish Charity Register

Context 

All charities in Scotland are under a legal duty to prepare annual reports and accounts, which they then submit to OSCR.  There is currently no legal requirement for reports and accounts to be published on the Scottish Charity Register.  OSCR has implemented a programme of “targeted regulation” in recent years, part of which has involved publishing the accounts of charities with an income over £25,000 and all Scottish Charitable Incorporated Organisations (SCIOs).  OSCR redacts all personal information before publishing to comply with data protection legislation (i.e. charity trustee names and signatures, photographs, and the signatures and personal details of independent examiners and auditors).  

Table 6: Question 1

On the Scottish Charity Register, should OSCR be able to publish charity annual reports and accounts in full for all charities?

	Yes	No	Not Answered	Total
Individuals	84%	15%	1%	127
Charity Sector	80%	10%	10%	164
Other	88%	0%	13%	16
Total	82%	12%	6%	307

Note: Percentages have been rounded therefore percentage totals may not equal 100%.

The vast majority of respondents SUPPORTED giving OSCR an explicit power to publish annual reports and accounts in full for all charities (82%), and felt that it was a sensible proposal.  

Support was highest among the other (including regulators) and individual sub-groups.  Within the charity sector, strongest support for this proposal was among national charities and membership/professional bodies.  While there was less support among local charities, the majority were supportive. 

The general consensus among all respondent sub-groups was that giving OSCR an explicit power to publish annual reports and accounts in full for all charities was in the best interests of strengthening the transparency of, and building public confidence in, the charity sector in Scotland.  The majority of feedback in support of this proposal was that it would lead to increased scrutiny, transparency, accountability and openness of charities to the public and other interested parties (e.g. funders, beneficiaries, potential donors).  

The general consensus among all respondent sub-groups was that promoting greater accountability and transparency would “increase public trust and confidence” in the charity sector in Scotland.  This finding supports previous OSCR Scottish Charity Surveys (2016 and 2018) which also found that the majority of respondents said that open access to accounts would improve their trust in charities.

Across all respondent sub-groups “open, direct and easier access” to more information was considered important for a whole host of reasons.  These were commonly reported as to:

• Provide evidence that charities were adhering to their legal responsibilities, and to maintain consistent standards across the sector.
• Increase knowledge and understanding of who was involved in managing charities, and how well they were run.
• Demonstrate how charitable funds were allocated and spent and that charitable funds and donations were used appropriately.   
• Demonstrate and showcase the activities charities have undertaken and the difference they were making. 
• Help funders, potential donors/trustees assess a charity’s viability and competency from a due diligence perspective.
• Remove the issue of over-redaction which diminished the quality and usability of accounts.
• Provide a platform for any issues/concerns to be raised.

The majority of respondents reported that much of this information was currently in the public domain, and that it would be reasonable and sensible for OSCR to publish charity annual reports and accounts in full for all charities on the Scottish Charity Register.  

Many respondents pointed out that annual reports and accounts were public documents which were routinely published on a charity’s website, and that anyone could make a direct request to a charity for a copy of its annual report and accounts (and that unredacted accounts would normally be provided).  Others mentioned that for those charities that were also companies, full accounts were also submitted to Companies House.

Some respondents made reference to the different challenges they encountered with the current system of accessing such documents.  This spanned: difficulties finding annual reports and accounts on individual charity websites; that many small charities relied more heavily on social media channels and did not necessarily have websites; the length of time taken to receive such documents following a direct request; and/or experience of requests either being questioned or not answered.   

“Ready and easy access” to such information in a “central place” was considered particularly helpful to make it easier for the public (and others) to find the information that matters to them.  The main feedback was that this would:

• Aid consistency and improve the quality of annual reporting across the charity sector. 
• Make accounts more user-friendly if published in full without redactions.  It was said that redacted reports often lead to inappropriate interpretation of charity accounts and financial information by users (e.g. taking information provided out of context).  Others felt that there was a low level of public knowledge on accounting and charity law which called for more information on how to understand charity accounts to aid greater transparency and accountability.  
• Enable potential donors/stakeholders to make informed decisions on which charities they supported and worked with.

Wider feedback provided by some respondents included:

• Charities benefit from “significant tax concessions”, and that publishing the annual reports and accounts of all charities in full would aid greater transparency of how charities work.
• The value of bringing Scotland in line with other charity regulators in the UK who are under a duty to have such information “open to public inspection” was further emphasised, in particular among the charity sector and other respondent sub-groups.
• That if OSCR was to publish all annual reports and accounts in full on the Scottish Charity Register, then charities would need to ensure that their accounts complied with the Charity Accounts Regulations, Statement Of Recommended Practice (SORP), and Financial Reporting Standard for Smaller Entities (FRSSE).  
• There would be less administrative effort for OSCR if it did not redact information (e.g. its online filing requirements could be adjusted accordingly).
• It might result in fewer direct requests by the public and funders to charities for this information (i.e. it would lead to time savings for charities).  
• It might reduce the volume of public requests to OSCR under Freedom of Information (FOI) legislation for information held on Scottish charities (i.e. it would lead to time/cost savings for OSCR). 

A further comment was that charity annual reports and accounts should be accompanied by their external scrutiny report.

Twelve percent of respondents DID NOT SUPPORT giving OSCR an explicit power to publish annual reports and accounts in full for all charities. Individuals, and within the charity sector, local charities were more likely to oppose the granting of such a power.

It is important to note that in many cases these respondents went on to provide wider narrative in support for OSCR publishing annual reports and accounts for all charities - but just not in full.  

The feedback from respondents that did not support this proposal largely focussed on two main points: 1) the need to readact sensitive personal (or commercial) information to ensure the privacy rights of individuals were respected and that GDPR and data protection legislation was not breached; and 2) concerns that a one-size-fits-all approach might not be appropriate, including that it could create an additional administrative burden for smaller charities.  

Wider feedback from many of these respondents was that there was no need for OSCR to publish annual reports and accounts for all charities given that a direct request could be made to a charity for these documents.  For some, the proposal appeared to be a duplication of work/effort.  The  concerns relating to data protection was emphasised by the individuals sub-group.  Data protection and the potential duplication of work was emphasised by local charities.

Summary

Overall, the general consensus among most respondents to the consultation was that the potential benefits of the proposal outweighed any potential risks.  Where risks were reported these can be categorised as follows:

• There were concerns about publishing sensitive personal information relating to trustees, staff, beneficiaries and donors.  It was felt that this could put people at risk of violence, abuse or intimidation and/or fearful of attracting unwelcome exposure.
• The publishing of sensitive personal information might deter people with a variety of “lived experiences” from becoming a trustee.
• The public might misunderstand or misinterpret information in a charity’s accounts – with some calls for continued efforts to improve the quality of annual accounts, including the narrative “to help explain the numbers”.
• It might create an additional administrative burden for smaller charities – a one-size-fits-all approach might not be appropriate.
• That the published information might be used unscrupulously (e.g. by media outlets).
• Charities might be less willing to outline their future plans to preserve a competitive advantage and/or to avoid revealing commercially sensitive information. 

Table 7: Question 2

Do you think there is any information in charity annual reports and accounts that should not be published on the Scottish Charity Register?

	Yes	No	Not Answered	Total
Individuals	39%	60%	1%	127
Charity Sector	32%	55%	12%	164
Other	44%	38%	19%	16
Total	36%	56%	8%	307

Note: Percentages have been rounded therefore percentage totals may not equal 100%.

Just over half of respondents felt that there was NOT any information in charity annual reports and accounts that should not be published on the Scottish Charity Register (56%). 

Individuals and the charity sector were more likely to be supportive of NOT redacting any information.  Within the charity sector, strongest support for publishing information in full was among national charities, followed but to a lesser extent by membership/professional bodies.

The main feedback across all respondent sub-groups that did not consider there to be any information that could not be published was that “full disclosure” and “transparency” were important, as were building and maintaining strong levels of public trust and confidence in the charity sector in Scotland.  

Many of these respondents felt that the current system of redaction undermined transparency.  Here, many reported that the material presented in charity annual reports and accounts should be available and in the public domain.  Further, a number felt strongly that there was no good reason for “secrecy” or “censorship”, that annual reports and accounts were “public documents”, and that the public had a legitimate right to know who is involved in the management of charities and how charitable funds were spent. 

Many added that this would be consistent with other charity regulators in the UK. 

Wider feedback reported by some respondents related to the improved utility and quality of reports, and a reduced burden on OSCR of redacting such information.

However, many of the respondants that felt that there was NOT any information in charity annual reports and accounts that should not be published on the Scottish Charity Register caveated their position. 

Many of these respondents felt that there should be some “exceptions to the rule” (covered in more detail in Section 1 - Question 3), with the main feedback related to specific concerns around data protection and GDPR, and the importance of charities being able to apply for a dispensation.  The main points raised can be summarised as follows:

• The publishing of annual reports and accounts on the Scottish Charity Register should exclude signatures to prevent fraudulent use.
• The publishing of annual reports and accounts should be conditional on existing provisions for excluding sensitive personal and other data to protect the safety and security of any persons or premises (e.g. home address, personal email address or phone number of trustees/independent examiner).
• Sensitive personal information and other data linked to charities involved in sensitive areas (e.g. religious activities, domestic violence, rehabilitation of offenders) should be excluded.  Many respondents made reference to trustees that were former or current service users as an illustrative example.
• That any personal details of beneficiaries should not be made public.
• OSCR should publicise the ability for charities to apply for a dispensation from having some or all trustee names published on the Scottish Charity Register.  It was reported that the onus should be on the charity to apply for a dispensation from publishing trustees' names, rather than OSCR undertaking a redaction.

Over one-third of respondents felt that there WAS information in charity annual reports and accounts that should NOT be published on the Scottish Charity Register (36%).

The other sub-group, followed by individuals, were more likely to show support for NOT publishing some information.  Within the charity sector, there was particularly strong support for not publishing annual reports and accounts in full among local charities.

The general consensus among respondents that felt there was information that should not be published was that “privacy was paramount”, and that the rights of volunteers and beneficiaries to remain anonymous must be respected.  

As such, the feedback largely reflected the points raised above, namely: 

• The importance of not publishing personal contact details to protect the safety and security of any persons or premises was emphasised.
• Signatures should not be published to prevent fraudulent activity.
• The publishing of sensitive personal information might be a disincentive to hold office.
• There should be a requirement to exclude sensitive personal information for charities involved in sensitive areas.
• Charities should be able to apply for a dispensation in circumstances where disclosure might jeopardise safety or security.

Some wider suggestions proposed, but not in many cases, were as follows:

• OSCR could follow the example of The Charity Commission for England and Wales who is empowered to ask for and receive unsigned copies (with a trustee confirming that the charity has a signed copy).  This approach means that OSCR would not have to redact information from the reports and accounts it received from charities.
• OSCR could permit charities to submit “type signed” accounts, or accounts that had been approved electronically (i.e. in a similar way to Companies House) by the trustees alongside the original signed accounts to OSCR for publication. 
• Guidance could be provided to auditors or independent examiners that they might sign in the name of the firm that they represent, or again, “type signed” might be acceptable for the version to be published.

Table 8: Question 3

Do you think charities should be allowed to apply for a dispensation (exemption) from having their annual reports and accounts published in full on the Scottish Charity Register?  

	Yes	No	Not Answered	Total
Individuals	30%	69%	2%	127
Charity Sector	45%	43%	12%	164
Other	44%	38%	19%	16
Total	39%	53%	8%	307

Note: Percentages have been rounded therefore percentage totals may not equal 100%.

There was relatively mixed views provided to this proposal.

Just over half of respondents thought charities should NOT be allowed to apply for a dispensation (exemption) from having their annual reports and accounts published in full on the Scottish Charity Register.

Strongest support for NO dispensations was among the individuals sub-group.  Within the charity sector, there was stronger support among local charities for no allowances to be made for dispensations.  Indeed, a number of these respondents reported that they “could think of no legitimate reason for any charity being given dispensation”.  

A number of common themes emerged from the feedback across all respondent groups, and in the main these reflected points raised earlier in Section 1 -
Question 1: 

• Transparency, openness, and accountability was considered paramount.
• That all charities should be “open to public scrutiny”.
• That dispensations might undermine public confidence and trust in the charity sector – “seen as an attempt to hide something”.
• Direct requests for this information could already be made to charities.

It was, however, commonly reported that current provisions which allowed OSCR to exclude information on the grounds of safety and security to persons and premises should continue. 

Almost 40% of respondents thought charities SHOULD be allowed to apply for a dispensation from having their annual reports and accounts published in full on the Scottish Charity Register.

Strongest support for dispensations was among the charity sector and other
sub-groups.  Within the charity sector, national charities and membership/ professional bodies felt strongest that there should be an opportunity to apply
for dispensations.

That being said, many of the respondents that reported that charities should be allowed to apply for a dispensation felt that “publication in full should be the default position”, and that “dispensation should be allowed in exceptional circumstances only”.  

Aligned to this point, was that “exceptional circumstances” would require to be defined and guidance/criteria produced for the sector.  In the main, support for charities to put forward a case for dispensation related to points made earlier regarding instances where publishing sensitive personal information might put an individual and/or premises at risk of unwelcome exposure.

Reference to The Charity Commission for England and Wales guidance was made: “Where the disclosure of the names of any charity trustees, custodian trustees, senior staff member, or persons with power of appointment, or of the charity's principal address could lead to that person being placed in personal danger (for example in the case of a women's refuge), the charity trustees may dispense with the disclosure provided that the commission has given them authority so to do”.