The start of the year is a good time for any business or organisation to think about any changes on the horizon in order to maintain regulatory compliance and good governance. For charities in recent times there have been changes to accounting rules, company law disclosures, ‘notifiable events’ and new annual reporting. Here we look at three legal and governance ‘hot topics’ to help get 2017 off on the right foot.
A new fundraising regime: data management
Scotland has a new fundraising regime, which has been specifically designed to meet the needs of the Scottish sector. It is also designed to reflect and encourage the good and appropriate methods of fundraising prevalent here. Charities should be aware of the new expectations in this area, in particular in relation to data protection and other information law responsibilities. Charities should review internal processes to ensure compliance. Failure to adopt the proper practices for data and information management could have serious financial, regulatory and reputational consequences.
Constitutional issues… and this is nothing to do with Brexit
A question on the new OSCR Annual Return asks: “When did the charity trustees last look at and consider the content of the charity’s governing document?” Charites must keep their founding document under review to make sure that it is fit for purpose, complies with duties and practice in relation to such things as tax, equalities and investments, accurately reflects what the charity currently does and provides appropriate flexibility to develop future plans. A constitution should act as the charity’s constitutional head, heart, body and soul. It should also make clear the relationship between different constitutional stakeholders, such as trustees and members. A failure proactively to consider the balance of powers and rights between them can store up significant latent problems.
The legal structure adopted for each charity should also be considered. Existing charities that are unincorporated associations or trusts should seriously consider whether or not they adopt a new legal form, such as the Scottish Charitable Incorporated Organisation, to avoid the dangers, disadvantages and distractions that can be caused be continuing with an unincorporated legal vehicle.
Charities and third sector bodies will also wish to consider the best structures to take forward new projects and ventures, such trading, commercial activities and social enterprise, especially where they sit outwith the charity’s purposes, even if the intention is to raise funds for these. This will involve consideration of the full range of legal vehicles on offer including Community Interest Companies and Community Benefit Societies.
Training as a foundation for good governance
The expectations and legal responsibilities of being a trustee or senior manager of a charity or third sector body are special. New and existing trustees/managers should receive training on their responsibilities and, importantly, as they apply to their organisations having regard to the sector in which they work and the other regulators they may have. The fundamental value of training for trustees has featured in OSCR Inquiry Reports, particularly where proper training has been absent.
This piece first appeared in the February 2017 issue of The CA, the magazine of the Institute of Chartered Accountants of Scotland
For more information please get in touch with your usual Brodies contact, or one of the individuals listed below.