There should be a publicly searchable register of charity trustees to bring them into line with company directors, says a new report.
The David Hume Institute (DHI) – an independent think tank – says that some charities are failing to be transparent by not making annual accounts openly available on their websites, nor information about their trustees.
The report recommends an extension of the Scottish Charity Regulator’s (OSCR) powers to ensure that charities are more accountable to the public. Improved transparency for persons with significant control over charities, the study argues, would also improve whistleblowing and complaints processes, and ensure any disqualified directors do not hold positions of power.
The OSCR welcomed the report and said more powers would help it regulate Scotland’s charity sector more effectively.
DHI’s latest research – Scotland’s Top Charity Leaders: How Diverse Are They? – focused on Scotland’s top 300 organisations with charitable status. Researchers analysed the backgrounds of chairs and chief executives and found that one in three leaders (34 per cent) are women and only one in 50 (two per cent) are black or Asian.
The study found that their leaders are “not representative of the communities they serve”.
DHI also reported that finding the information was difficult and that not all organisations are open about who is in control. It noted there has been a fivefold rise in Scottish Charitable Incorporated Organisation (SCIO) registrations over the past decade, which means charity trustees now have less requirement for transparency.
SCIOs are specially designed for the charity sector. They resemble charitable companies in some respects but, unlike them, SCIOs are only regulated by OSCR and not by Companies House.
Since the new legal form of SCIO was introduced in 2011, one in five charities registered with OSCR have adopted this legal form and need only report to a single regulator. Nineteen per cent of Scottish charities are limited companies reporting to Companies House as well as OSCR.
Companies House requires a higher level of public transparency for directors than OSCR requires for trustees. With former, every company has to do an annual return which confirms who their directors are, and when appointed they have to declare names and date of birth.
There are no such requirements for an annual return for OSCR and no publicly searchable register of trustees showing potential conflicts of interest.
Susan Murray, director of DHI, said that charitable status comes with high levels of public trust and tax breaks, as well as a legal responsibility to deliver public benefit.
“It is hard for the public to hold people to account if they don’t know who they are. Unlike businesses, there is no searchable public register of who is making the decisions and it is difficult to find out when an individual is connected to multiple charities,” she added. “Before the creation of Scottish Charitable Incorporated Organisations) many more charities were limited companies and were required to declare their directors.
Murray argued that an extension of OSCR’s powers – to create a publicly searchable register of charity trustees – would increase transparency and “enable monitoring on diversity.”
Database of Charities and Trustees
In reply an OSCR Spokesperson said the study was a “positive contribution” to the ongoing debate on how Scotland’s charities can continue to maintain the confidence of the public.
“A trustee database would provide us with the information we need to help us regulate Scotland’s charity sector more effectively, which is why it is one of the ten positive proposals for updating charity law which we have proposed to the Scottish Government,” the OSCR spokesperson added.
Anna Fowlie, chief executive of the Scottish Council for Voluntary Organisations (SCVO), commented: “Clearly, just like other sectors and most aspects of Scottish society, there’s a way to go in terms of diversity. The report surfaces two other long-standing issues – transparency around trustees and the definition of a charity.
“SCVO supports the call for a searchable public register of trustees provided there are safeguards in place, particularly for trustees who bring their lived experience into the boardroom.
A Scottish Government spokesperson said: “The recommendation to increase transparency and accountability across the sector by creating a publicly searchable register of charity trustees mirrors the widely supported proposals set out in our 2019 consultation, to introduce new powers for the Office of the Scottish Charity Regulator to publish all charity accounts in full and establish a public register of trustees.
“Enhanced transparency and accountability in charities and those that lead them has a direct link to public trust and confidence, which is the foundation of the charity sector and its sustainability.”
Photo Credit: iStock/Megafloop