April 16, 2014

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Written by Martyn Evans, Chief Executive, Carnegie UK Trust

As the Charity Commission in England and Wales implements drastic budget cuts amid lively debate on its future role, Scotland’s charity regulator OSCR is now firmly embedded. So what role should a charity regulator play?

Why do we need regulation?
Regulation of any kind is a means to an end and not an end in itself. An effective regulator adopts rules directed at shaping practice or controlling behaviors in some way and then putting machinery in place to enforce those rules. Charities rely on the behavior of each other to maintain public trust in all charities and retain their tax and other privileges. Even one failure of trust by one charity can have a disproportionate effect on the standing of us all. Public confidence and trust is critical to the sector not only to raise donations but to maintain our influence in public policy and social change.

Charities operate with a mix of self-regulation and more formal regulation. We are all better for having an effective external regulator to ensure openness and transparency. Many would agree there are principles of good regulation: proportionality, accountability, consistency, transparency and targeting.

tree of handsThe establishment of OSCR
I was a commissioner on the Scottish Charity Law Review Commission which reported in 2001. We were asked to review the law relating to charities in Scotland and to make recommendations on any reforms it considered necessary. One of the recurring themes throughout the consultation process was the lack of a charity-focussed organisation with real powers, in Scotland.

We concluded that Scottish charities were at a serious disadvantage in not having an effective regulator. Our recommendations led to the establishment of the Office of the Scottish Charity Regulator (OSCR). They are our sector’s independent regulator and registrar for over 23,000 Scottish charities, including community groups, religious charities, schools, universities, grant-giving charities and major care providers.

OSCR today
OSCR has built its reputation well and charities have confidence in its effectiveness. It has navigated its way through the tricky issues, such as the charitable status of private schools. It appears accessible, knowledgeable and engaged with the sector. It is not without criticism. The Scottish Council for Voluntary Organisations (SCVO) launched a campaign some years ago focused on the cost to charities and other voluntary organisations in staff time and administration by complying with demands for information from regulatory authorities. Their report alleged that managers of small charities are spending 10% of their time on dealing with OSCR regulations.

An evolving role
One area where views are more deeply split is whether a regulator should provide advice and guidance to charities or leave that to intermediary sectorial bodies. The Charity Commission for England and Wales appears to offer a great deal more gubooksidance than OSCR. Of course some Scottish charities refer to the advice the Commission offers, which is risky given it has no jurisdiction. Some take the view that providing advice is the regulator overstepping the line, but I think responsible organisations should welcome good quality guidance, which can be extremely helpful and save reinventing the wheel time and time again – for 24,000 charities in Scotland to each deal with the same issues from scratch would be a terrible waste of energy and resources. But it needs to remain guidance, not instruction. A good example would be from our own research A Charitable Concern (2012). The report explored the state of awareness, understanding of, and responses to the implications of the referendum on independence amongst charities in Scotland.

One of our recommendations was that OSCR should support charity trustees by providing guidance on the implications of proposals for further constitutional change on charities. They have now done so and it provides us with a route map to navigate an unfamiliar, and infrequent, referendum process.

As charities, we have many privileges, and I feel strongly we must balance these by exercisingclear responsibilities and seeking to maintain and indeed improve public trust in our individual charities and the sector in general.

This article was originally published in the Association of Charitable Foundation’s Trust & Foundations News April 2014.