Simon Mackintosh Partner

Changes made and recommended Possible reviews of 2005 Act/parts of it Review of Charities Act 2006 The 2005 Act and beyond

Public Services Reform (Scotland) Act 2010 Part 9 – Sections OSCR’s “shopping list” Changes made

Variable (extend time/remove steps) Revocable Appealable (take steps) Compare directions given to four schools 2010 Act – OSCR’s Directions

OSCR power to appoint acting trustee 12+3 months Court of Session power of deemed removal 2010 Act – Trusteeship

Legislation already allows variation of constitution transfer to/amalgamation with another charity Purpose – enable better application of resources, within spirit of constitution, or more effective administration 2010 Act additions:- Desirable to introduce a provision (not a new purpose) to a charity’s constitution Provided that consistent with spirit of constitution Applies to OSCR/Court of Session 2010 Act – Reorganisations

Some or all of purposes Fulfilled/otherwise adequately provided for Can no longer be given effect to Ceased to be charitable Ceased to provide suitable/effective method of use Use for part only of property Can you find the “donor”? Reorganisation Conditions

A document includes a web page or website Also applies to SCIOs Subject to Regulations Information - documents

TII unintended casualty of remuneration provisions of 2005 Act 2010 Act rectifies Charity trustees may purchase without infringing remuneration rules Covers trustees and directors/officers of related corporate body Remuneration – trustee indemnity insurance

Must exclude Criminal fines/regulatory penalties Criminal proceedings involving conviction for fraud/dishonesty/willful or reckless misconduct Trustee knows not in interests of charity or did not care T11 Conditions

OSCR’s Report Interpretation of “charity” pre-2005 constitutions OSCR power to make positive directions Connection with Scotland Alternative office Public collections – state whether charity OSCR’s Further Recommendations

Certain parts of 2005 Act need review, in particular:- Reorganisation provisions Difficulties in interpretation/application Policy underpinning to be assessed Provisions should be redrafted in light of re-evaluation Consistent theme of OSCR: a constitution “fit for purpose”. OSCR’s Recommendations – Reviews

Wider review of 2005 Act Comprehensive evaluation against policy objectives Consideration of new policy context/objectives Would form basis of future legislation Wider review within five years Reviews (2)

Policy memorandum for Bill Objective is to ensure −Robust proportionate transparent regulatory framework WHICH −Satisfies public interest in effective regulation of charities AND −Meets the needs of the Scottish charity sector Policy objectives of 2005 Act

Contains a requirement for review This is underway:- late Topics to cover Westminster Charities Act 2006

Will probably include:- Charity Commission role Public benefit Charity tribunal Fundraising rules Registration thresholds Act 2006 Review

For 2006 Act review:- Public confidence Charitable donation levels Willingness to volunteer Reasonable test of 2005 Act as well Minimum Review Items

Where are we with public benefit? ISC case in England Four Scottish schools await OSCR’s decision Is ISC case applicable here? 2006 Act preserved existing English law 2005 Act gives Scottish definition of elements of public benefit Case is helpful, not binding

OSCR online reporting and monitoring No launch date yet for OSCR online Online reporting/updating Simplified annual returns More on Scottish Charity Register OSCR changed focus on monitoring public benefit/risk management? Cover these clearly in your Annual Report

Gavin McEwan Partner

Independent examination versus audit What is the difference? Why does this matter to charity trustees? Examination of Accounts

Audit Duty of auditor: make a positive statement Do the accounts show a “true and fair view”

Work leading to final conclusion Build up a body of evidence to support auditor’s view Examination of Accounts

Independent Examination Duty: “negative assurance” Nothing to suggest that the law and accounting regulations have not been complied with Examination of Accounts

Lesser degree of scrutiny No obligation to identify fraud No obligation to test internal financial controls Examination of Accounts

Audit provides degree of assurance Charity Trustees must not treat independent examination as an equivalent May be sufficient scrutiny, but of a different degree Examination of Accounts

When is a restriction not a restriction? Use of terms ‘restricted’, ‘designated’, ‘endowment’ Compare accounting treatment with legal position Restricted Funds

Restrictions imposed by a donor or testator Restrictions which are self-imposed Identifying which is which: lack of documents; passage of time; unclear wording Restricted Funds

Self-imposed restrictions can usually be ‘unimposed’ Formal, binding restrictions require a legal process Court, or OSCR? Restricted Funds

Example: Legal of £300,000 in 1982 “To fund conservation of paintings” Charity decides only to spend income, thereby creating an ‘endowment’ Restricted Funds

Public Services Reform (Scotland) Act 2010 Restricted fund reorganisations Conditions to meet OSCR process Restricted Funds

Benefits Accounting Availability Experience to date SCIOs