The below article appeared in Charities Management on Monday 11th April 2016.

From 1st April 2016, the Office of the Scottish Charity Regulator introduced, among other new measures, its notifiable events scheme. This new self-reporting, self-evaluating scheme is an active extension of OSCR’s role as Regulator to assist charity trustees to deal with and prevent issues arising within their charity, to increase transparency and accountability, and ultimately to support and improve public confidence in charities.

OSCR has published guidance on the new scheme to help charity trustees understand what a notifiable event is and when a report to OSCR should be submitted.

What is a "notifiable event"?

Broadly, "notifiable events" are serious incidents which have had, or threaten to have, a significant impact on the charity itself (including its reputation) or its charitable assets. Reporting notifiable events is not a legal requirement: there is no statutory obligation on charity trustees to report such instances to OSCR.

It is hoped that charity trustees will adopt self-reporting as part of their general duties and responsibilities. In its guidance, OSCR states that it would be concerned if a serious event occurred and was not reported to it at the time, and they later became aware of it.

Specific to each charity

As with its other recently published and/or updated guidance, OSCR has helpfully provided examples of what a notifiable event may be. Notwithstanding the examples, it is made clear that what is considered a significant event will be specific to each charity and its individual circumstances. The charity trustees must consider the event in light of the size and nature of the charity and its potential impact when deciding whether it is a notifiable event and whether it should be reported.

Categories of notifiable event

There are eight categories of notifiable event listed in the guidance:-

  • Fraud and/or theft – as these are criminal offences, the charity trustees must report the matter to the police in the first instance and obtain a crime reference number prior to reporting it to OSCR.
  • Substantial financial loss – whether the loss is substantial will also be subjective to each charity, however as a guide, OSCR advises that a loss which is 20% or more of a charity’s income should be considered substantial. This should not prevent charity trustees reporting smaller amounts if they consider the loss to be substantial to their individual charity.
  • Incidents of abuse or mistreatment of vulnerable beneficiaries – such incidents and allegations, where there are reasonable grounds for suspicion that such abuse or mistreatment took place, should be reported.
  • Not enough charity trustees to make a legal decision – if your charity does not have enough trustees to form a quorum in accordance with your charity’s governing document, this should be reported to OSCR, along with any decisions taken whilst the board was inquorate.
  • The charity has been subject to a criminal investigation by another regulator or agency, sanctions have been imposed, or concerns raised by another regulator or agency – OSCR would like to be informed of ongoing investigations by other regulators or the police. An update on any key points during the investigation and the outcome should also be submitted.
  • Significant sums of money or other property have been donated to the charity from an unknown or unverified source – suspicious or tainted donations should be reported. The general guidance on the donation thresholds from OSCR adopts the guidance from the Charity Commission for England and Wales: a donation greater than £25,000 from an unknown/unverified source should be reported.
  • There are suspicions that the charity and/or its assets are being used to fund criminal activity (including terrorism) – the charity trustees should be on high alert for such suspicious activity.
  • A charity trustee is acting whilst disqualified – you are disqualified as a charity trustee if you fall within the provisions of s.69(2) of the Charities and Trustee Investment (Scotland) Act 2005.

Reporting to OSCR

When submitting a report to OSCR, it will want to know the details of the event including:

  • What the event is and how it has (or may have) a serious impact on the charity. There is no fixed format for the presentation of this information, but OSCR needs to receive sufficient information to understand the event which has arisen.
  • What action (if any) has already been taken in response to the event.
  • What further plans the charity trustees have in place to deal with the event.
  • What plans the charity trustees have in place to mitigate similar events which may arise in the future.

It would be prudent for charity trustees to review the guidance to ascertain what additional information OSCR will likely seek in relation to specific categories of notifiable events. Reports of notifiable events should be submitted to OSCR by email to the dedicated notifiable email address.

No deadline for notification

There is no deadline or timescale within which to notify OSCR of the serious event. The time at which to do so will largely be dictated by the nature of the event and the surrounding circumstances. While the charity trustees should not unduly delay reporting, they are not required to immediately report the incident as soon as they become aware of it.

Depending on the urgency of the threat or potential impact, the charity trustees may take reasonable time to review and investigate the situation, and begin to take steps to deal with the matter and mitigate the consequences prior to submitting a report. It will stand the charity trustees in good stead to include in the report the action points they have implemented so far in response to the event.

From its inception under the 2005 Act, OSCR has always attempted to be a proportionate regulator: when it takes action, when it investigates a charity or charity trustees, when it responds to complaints etc., it aims to do so in a proportionate manner. This trait can also be seen in the notifiable events guidance.

OSCR suspects that, in most instances, the issue will either have adequately been dealt with by the charity trustees and/or steps will have been taken to prevent the issue from reoccurring. In such cases, it will simply review the report and decide if any further investigation or follow up with the charity trustees is required. It is anticipated that only in a small number of occasions, OSCR will look into the matter further.

When no need to report

There are two instances when an event which would normally be considered a notifiable event does not need to be reported to OSCR:

  • If the charity is registered with either the Scottish Housing Regulator or dual registered with the Charity Commission for England and Wales – in these cases, OSCR has internal arrangements in place with these regulators and a separate report to OSCR is not required. This exception does not apply to all regulators, only the aforementioned bodies. Therefore, if the charity is registered with any other regulator (such as the Care Inspectorate or Companies House), then a report should be submitted to OSCR.
  • If the incident is a crime – in this case, the charity trustees should report the matter to the police in the first instance. The matter should then only be reported to OSCR under the notifiable events scheme if it has had, or will likely have, a significant impact on the charity overall. The charity trustees’ judgment is a key part of the process.

Effect of the new scheme

It is hoped that the introduction of this new scheme will encourage and assist charity trustees to identify and deal with matters which may have a serious impact on the charity with greater confidence and efficiency. This is a tool through which OSCR can support charity trustees in their management of Scottish charities. It is inevitable that notifiable events will occur at some point during the lifetime of a charity; it is how the charity trustees identify and respond to it that is important.

Other changes from OSCR

The notifiable events scheme was not the only change to be implemented by OSCR from 1st April. Other changes to look out for include:

  • Publishing charity accounts online – this change is also to improve transparency and accountability. Although charity accounts are already a public document, usually a member of the public would need to contact the charity directly to request a copy. All accounts received from 1st April from charities with an income of £25,000 or more and all SCIOs will be published on the charity’s register entry. Charities which already publish their accounts online can also provide OSCR with a link to the accounts to include in their register entry.
  • The Annual Return form – the questions contained in the Annual Return form are changing and will ask more about the governance of the charity and related matters.
  • A new focus on the Targeted Regulation framework – OSCR has published guidance on its revised approach to charity regulation in light of its 10 years of experience. It will target the key areas identified where issues are likely to arise. OSCR has expressed that its Targeted Regulation framework is a living document and it will continue to develop as new issues and areas of concern arise.