The below article, by Anna Dove, appeared in The Scotsman's Charity Law Review on Friday 18th December 2015.

Scrutiny puts third sector in the spotlight

The death of Bristol poppy seller Olive Cooke earlier this year and the case of elderly Mr Rae, who was hounded for donations and conned out of £35,000 by rogue firms after failing to tick a box on a survey in 1994, have resulted in heightened scrutiny surrounding how charities handle personal data.

While intensive media coverage of the two cases has arguably put some charities in a bad light, lawyers working with clients in the third sector are taking a positive outlook on the situation.

Alan Eccles, charities and third sector partner at Brodies, says that from a general governance perspective, the data protection situation underlines that there are requirements about how charities interact with the public.

“Just because you are a charity doesn’t mean those responsibilities fall away,” says Eccles.

“Looking at it positively, I wonder if in some ways the outcome of all this is there will be more modern styles of communication between charities and potential donors – communicating the impact that charities makes rather than just ‘stopping someone in the street’.”

Stephen Phillips is head of the public and third sector team at Burness Paull and convenor of the Law Society of Scotland’s charity law sub-committee.

He agrees that the issue remains live and says he has recently been involved in tying up a fundraising agreement for a major Scottish charity.

However, according to Phillips, the Scottish situation is seen as less worrying than it has been south of the border in the wake of the Mrs Cooke and Mr Rae cases.

“Charity fundraising is an interesting one,” says Phillips. “In Scotland the view is that the processes are actually working reasonably well and that the situation is not as critical as suggested by media reports.

“There’s been a bit of kickback on the suggestion that radical action is needed in Scotland; and some suspicion that newspapers are stirring up sentiment in a way that isn’t necessarily warranted.”

Gavin McEwan, deputy head of Turcan Connell’s charities legal team also highlights fundraising as a major focus of the last 12 months, albeit from a slightly different angle.

“Another aspect is whether money raised by charities is being used properly by the charity,” says McEwan. “That’s an issue that’s come up in a number of recent cases in the media. The Kiltwalk was an example of a case where fundraising practices were questioned.

“South of the border, but with lessons for the whole of the UK, was the Kids Company case.

“Although that wasn’t just about fundraising, there were fundraising aspects to why Kids Company failed.

“Fundraising in its very widest sense is a big topic just now.”

According to McEwan, some charities are still not quite tuned into the rules of good governance and promoting best practice. “There’s still a bit of education required in the sector,” he says.

Social enterprise and social investment is another area in which significant growth has been reported in 2015. Although it is an area that has been bubbling along for years, social enterprise is now coming into sharper focus.

Phillips says that in his view the sector has never really reached the level of growth we would have wanted it to.

“There are still only a handful of social enterprises of real scale in Scotland,” says Phillips.

“It needs investment, and arguably it needs investment of a form that the banks can’t supply.

“It’s quite a complex area but it’s certainly an area that’s going to be more and more important because the social enterprise movement has gained real momentum.”

While in the past individual donors may have offered financial support to charitable causes, people are increasingly looking to achieve a social impact by setting up businesses such as cafes and restaurants where 100 per cent of the profits are donated to charity.

One such social enterprise is Social Bite where one in four of its employees at its Edinburgh and Glasgow cafes have experienced homelessness.

“We have seen a resurgence of individual philanthropy,” explains Eccles. “I think they see philanthropy very much as part of being an entrepreneur.”

A prime example is Garreth Wood, owner of Speratus Group, who announced this summer that all the profits from his Boozy Cow restaurants in Aberdeen and Edinburgh would be donated to Scottish charities.

“We are also seeing the rise of social enterprises and again people coming at it with an entrepreneurial mindset that charities should be run like businesses but they are trying to achieve a social impact,” continues Eccles.

“The various types of social enterprises that people are coming up with are very interesting.

“People are wanting to achieve a particular social or community outcome and are thinking that a business approach to it is the way that that can be achieved.”

McEwan has noticed an increase in the number of people consulting Turcan Connell on the changes to Scottish income tax as a result of the Scotland Act 2012 and the Scotland Bill which is currently going through Westminster.

“The question we are being asked is will this have an impact on Gift Aid,” says McEwan.

“At the moment the simple answer is no. At some point it may be that aspects of charity tax relief will be further devolved to Holyrood.”

Ten years since the foundation of charity regulator OSCR, McEwan says it has built up its reputation as a trusted regulator.

“It’s trusted by charities and, so far as I can tell, by the vast majority of the public,” says McEwan.

“The other really positive thing about OSCR is their staff are really approachable, really helpful, and they are not lawyers so they are approaching problems and complaints with a lay person’s hat on.”

Eccles’s impression of OSCR a decade on is also positive. “Prior to OSCR there was really nothing,” he says. “I think it has made people think about how they operate their charity and whether they should become a charity trustee. People now have to think about the impact and influence their charity needs.”