Charities (Regulation and Administration) (Scotland) Bill: business and regulatory impact assessment

Enforcement, sanctions, and monitoring

Monitoring and enforcement of the new provisions will be subsumed into OSCR's existing processes. Where charities are required to comply with the new provisions failure to do so will be treated as trustee misconduct and subject to the powers currently available to OSCR. No new offences or 'sanctions' will be created by the Bill.

Implementation and delivery plan

The provisions in relation to strengthening regulation of the charity sector are being instructed as part of the Charities (Regulation and Administration) (Scotland) Bill, to be introduced in Parliament in November 2022.

Post-implementation review

The Scottish Government is committed to carrying out a wider review after the passage of this legislation.

The Scottish Government is aware that some in the sector wish to see a broader review of charity regulation. However, this requires further consideration and comprehensive consultation. Following the passage of this Bill, the Scottish Government will engage with the charity sector on the wider questions for review.

• Summary and recommendation

We explored 2 options in this assessment:

1. Do Nothing – this option was deemed unsuitable

2. Progress the proposals developed for the Charities (Regulation and Administration) (Scotland) Bill

Option 2 is the preferred option. We recommend that the proposals are brought forward to achieve the goals laid out in this document. There are 3 main policy drivers for the Bill:

1- transparency: making information more accessible to the public

2- Increased powers for OSCR to support charities who are struggling and direct charities in positive courses of action.

3- Bridging gaps between Scottish Charity law and Charity Law in the rest of the UK.

There have been four revisions of charity law in England and Wales since the introduction of the 2005 Act in Scotland. While the intention is not to replicate all the changes that have taken place across the rest of the UK, it is clear that changes require to be made to protect Scotland's charity sector, and to ensure that OSCR is not seen as a 'soft touch.'

Stakeholders are keen to see changes brought forward given it has been 17 years since the 2005 Act was passed.

Stakeholder expectations of primary legislation have been raised by four PfG commitments and many already see the legislative changes as taking too long, viewing the changes as straightforward and technical.

Summary costs and benefits

• Option 1 – Do Nothing

Total benefit per annum: economic, environmental, social:

-No benefit – many risks have been identified with this option

Total cost per annum: economic, environmental, social policy and administrative:

- No cost.

• Option 2 – Progress the Bill

Total benefit per annum: economic, environmental, social:

• Increasing transparency and accountability in charities will lead to an increase in public trust in the charity sector.
• A number of the proposals will introduce improvements to OSCR's enforcement powers, introducing efficiencies for compliance, investigation, and engagement work.
• Bringing Scottish charity legislation up to date with key aspects of charity regulation in England and Wales and Northern Ireland. This protects the Scottish Charity sector from those looking to exploit the disparity between the legislation in UK and Scotland.
• Publishing statements of account for all charities will make it quicker and easier for funders/donors to see how public money is being spent. It will enable banks and funders to do due diligence. It will also free up resources within OSCR, allowing it to target its limited resources more effectively.
• Including names of charity trustees on the Register and creating an internal database of charity trustees will make it easier to identify who is in control and management of charities. It will enable OSCR to act more quickly and decisively where vulnerable beneficiaries or charitable assets may be at risk.

Additionally, this information will make it easier to establish if a person is a trustee of more than one charity, making it easier for OSCR to act more swiftly to protect assets or vulnerable beneficiaries of other connected charities where there is concern over conduct.

The record of removed trustees will assist charities in carrying out their due diligence checks on prospective trustees.

• This Bill aims to make it easier for OSCR to remove from the register charities that are persistently failing to submit accounts and may no longer exist. By providing OSCR an explicit power to remove a charity that has ceased to exist or no longer operates they will make a significant saving on resources that have previously gone into understanding and pursuing defaulting charities with minimal return.

Defaulting charities have a negative impact on public trust and confidence in the sector, and OSCR as a regulator, and that such charities should be removed from the register. If charities are not communicating with OSCR they have no way of knowing how public money/assets are being accounted for, or if the charity is providing public benefit.

• It will also make it easier for OSCR to ascertain what activities a charity is carrying out and how they are providing public benefit. It also reduces risk of OSCR losing touch with such charities.
• Extending the range of bodies that may be subject to inquiries, enables OSCR to make inquiries into individuals who acted for or on behalf of those bodies (including former charity trustees). This will allow OSCR to gather the necessary information about such individuals to support an application to the Court of Session for their permanent disqualification. This reduces risk that trustees who are guilty of serious misconduct could go on to be trustees of other charities if the misconduct were only discovered after the charity in question ceased to exist or ceased to be a charity.
• A requirement for bodies that have de-registered (and continue to operate) to use the assets held at the time of removal for charitable purposes and to provide public benefit, in order to protect charitable assets.
• The Bill will also provide clarification of existing provisions in relation to notices and notice periods/ time limits when OSCR is carrying out inquiries, to improve speed and efficiency regarding OSCR's powers to gather information for inquiries.
• At a time when the charity sector is expecting to see a huge influx in the public requiring their services due to the socioeconomic situation brought about by the ongoing covid recovery, public sector spending reform and the cost-of-living crisis only growing in urgency. Building trust in the sector will only benefit Scotland in the long run.
• The Bill is not anticipated to require significant additional activity by charities, other bodies, individuals or businesses and any new costs are considered to be negligible.

Total cost per annum: economic, environmental, social policy and administrative:

• Best estimates of the costs to the Scottish Administration as a result of the activities affected by the provisions of the Bill over the course of the first three years from commencement have been calculated by OSCR. This includes both initial implementation costs as well as any ongoing annual costs. All costs below are resource costs:

Year 1: £438,229 – £655,770

Year 2: £66,825 – £182,785

Year 3: £63,607 – £177,886

Total: £568,661 – £1,016,441