Scottish charity law: consultation analysis

Section 7

Inquiries into the former charity trustees of bodies which have ceased to exist and bodies which are no longer charities

Context

The Court of Session, on application from OSCR, has the power to permanently disqualify individuals from being charity trustees (e.g. former charity trustees of a body which is no longer a charity or of 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).

OSCR does not have the power to make inquiries into a body which is no longer a charity, a body which is no longer controlled by a charity or a charity which has ceased to exist.  This means that if OSCR is not aware of potential misconduct before a charity ceases to exist, before the charity is removed from the Scottish Charity Register, or while a body was controlled by a charity, OSCR cannot open an inquiry if information subsequently comes to light.  If OSCR cannot open an inquiry, it cannot gather the necessary evidence to allow it to make an application to the Court of Session.  This poses a risk that trustees who are guilty of serious misconduct could go on to be trustees of other charities if the misconduct was only discovered after the charity in question ceased to exist or was removed from the Register.

Table 22: Question 18: 

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?

The vast majority of the respondents SUPPORTED the proposal that OSCR should 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 (83%).

On balance, the granting of such a power to OSCR was considered prudent, conducive to effective regulation, and that it would strengthen the legislation as it currently stood.  

Much of the feedback was that this would strengthen transparency and accountability and foster public trust in the charity sector – “The integrity of the charity sector and the public’s confidence in it rests to a significant degree on ensuring that those charged with running charities are fit to do so”.

The majority of respondents emphasised the importance of OSCR having sufficient powers at its disposal and greater scope to investigate potential wrong-doing and misconduct, and to take appropriate enforcement action where required.  It was reported that this would help ensure that former trustees were not able to evade investigation or regulatory scrutiny by OSCR, and from a due diligence perspective it would mitigate the risk of trustees that were found guilty of serious misconduct becoming trustees of another charity.

The main benefits of the proposal reported by many respondents included that it would: 

• Protect and safeguard charitable assets. 
• Protect the reputation of the charity sector in Scotland.
• Strengthen public confidence in charity regulation.
• Protect and safeguard the public and beneficiaries.

A few respondents mentioned that the expansion of such powers granted to OSCR might have a detrimental impact on individuals coming forward to become involved as charitable trustees.  A few others mentioned that the additional administrative cost of OSCR undertaking this role could be substantial.

While there was overall support for the proposal that OSCR be able to undertake inquiries into the former charity trustees of bodies which have ceased to exist and bodies which are no longer charities, some wider points worth noting included that:

• There would need to be a transparent process/framework put in place, including clear articulation of the conditions under which this power could be used.
• That OSCR would require to satisfy itself that it had sufficient evidence/reasonable grounds regarding potential misconduct that justified the need for an inquiry to be undertaken.  For example, a few respondents highlighted that some charities “close for good reason”, and that it was not always to do with bad/poor management, misappropriation of funds, etc.
• That any powers should be proportionate and time-limited (however, a few felt that there should be no time bar set).
• That there would need to be a rights of appeal process.

• That enforcing co-operation of former trustees might be extremely difficult, especially where significant time had passed.  Others highlighted that the passage of time would also present challenges in terms of finding evidence of misconduct, etc.

A wider point noted related to the implications of this proposal for cross-border charities.  For charities registered in multiple jurisdictions it was proposed that “any such action should only be taken by the lead regulator and such a power conferred to OSCR should not result in multiple investigations and sanctions in relation to one incident or issue”.

Only 6% of respondents DID NOT SUPPORT the proposal for OSCR to make inquiries into former trustees as detailed above.

The main feedback from these respondents included that (note: absolute numbers were small):

• Some concerns were raised that OSCR could undertake inquiries “on a whim or based on a rumour” without having robust evidence of potential wrong-doing or misconduct.  It was further reported that the reasoning behind making such inquiries must be made clear and be in the public interest.  
• It was felt that information relating to any potential historical criminal offences should be re-directed to the most appropriate agency (e.g. Police, Home Office, etc.). 
• It was felt that consideration could be given to what The Charity Commission for England and Wales’ policy was for undertaking inquiries into the former charity trustees of bodies which have ceased to exist and bodies which are no longer charities.

While not reported in many cases, there was feedback that the proposal was too broad, with preference for OSCR to be able to seek a court order to be able to access information and make inquiries.