Charity Commission v OSCR - who can weed out the bad apples
Gillian Harkness looks at the Charity Commission and OSCR to see which system is most likely to uncover bad practise and avoid another Kids Company
As part of the fall-out from the closure of Kids Company, the award-winning charity championed by Prime Minister David Cameron, the issue of targeted regulation of charities has been a hot topic on both sides of the border. But how different are the approaches of the Charity Commission in England and Wales and the Office of the Scottish Charity Regulator (OSCR), and which is likely to yield the best results?
Since a scathing 2013 report by the National Audit Office concluded that the Charity Commission was “not fit for purpose”, the organisation has undergone a programme of reforms that seek to move away from its historically reactive methods to a more proactive method of working. It has employed a new risk model, which assesses every registered charity against key regulatory risks. This allows the commission to target its resources primarily at high risk cases.
Increased transparency will give more power to members of the public to identify potential risks
At the other end of the scale, low risk cases will be subject to less labour intensive automated processes. These changes are a major step for an organisation that, just two years ago, was said to make little proactive use of risk analysis, relying instead on concerns raised by members of the public and trustees as the catalyst for launching investigations. The change programme isn’t perfect and has cost the taxpayer around £9m extra so far, but a follow-up report from the National Audit Office, published in January of this year, praised the good progress being made by the regulator and described its transformation programme as “credible”.
By contrast, OSCR’s 2014 consultation on targeted regulation was launched not in direct response to a damning report or a particular scandal (although the issues elsewhere in Britain were surely a factor), but as a general attempt to reinforce public confidence in the charity sector. The consultation laid out various proposals aimed at increasing proactivity and promoting more effective use of resources. It had four key principles:
- changing the content of the annual return to include information that helps OSCR better understand how charities are operating;
- publishing charity annual reports and accounts on the Scottish Charity Register;
- creating a database of all charity trustees;
- introducing a “notifiable events” scheme. This mechanism, which was discussed in a previous blog, places a duty on charities to report any high risk incident (eg. large financial losses, criminality, breach of trust, abuse) to OSCR. A similar scheme, known as “serious incident reporting”, already exists in England and Wales, and is not without its critics.
Reaction to the consultation was mixed, with fears that the new annual return requirements would place an undue administrative burden on charities, and concerns over the privacy of trustees. However, the broad consensus amongst respondents was in favour of the proposals, and OSCR has stated an intention to implement each of them once refinements have been made.
It could be argued that the changes increase OSCR’s ability to be proactive whilst simultaneously strengthening its current reactive tools. The changes to the annual return and the introduction of the notifiable events regime are aimed at allowing the regulator to better identify at-risk charities and to investigate them proactively. The hope is that this improved risk assessment will ensure there is no Kids’ Company equivalent in Scotland.
Whilst OSCR’s proposals do not appear be as in-depth as the Charity Commission’s strategy, they certainly move in the same direction. Meanwhile, the increased transparency offered by the publishing of accounts and the trustee register will give more power to members of the public to identify potential risks, thus strengthening OSCR’s traditional arsenal of reactive measures. Even this, though, has its pitfalls, with the Law Society of Scotland’s response to the initial consultation identifying the risk that the regulator will require additional resources to deal with an upturn in queries and complaints. Another potential downside, as discussed in our blog last month, is that such transparency may lead to a further loss of public confidence, the very ill the changes are aiming to remedy.
The Charity Commission’s embrace of the concept of proactive, targeted regulation has arguably been more enthusiastic than that of its Scottish counterpart. The changes that OSCR is bringing in may not appear quite as radical as those to be implemented south of the border, but they will still have a significant effect on charities in Scotland.
Targeted regulation is one of the topics being discussed at the upcoming Burness Paull third sector conference in Aberdeen on 19 November 2015. Attendees will hear from Stephen Phillips, the head of Burness Paull’s third sector team. For more information contact Elaine Creamer.
Gillian Harkness is a senior associate at Burness Paull