The Office of the Scottish Charity Regulator (OSCR’s) Rolling Review Process
OSCR published its eagerly awaited rolling review pilot report on 18th July. There has been much interest in this review process, not only because it is the first time it has been undertaken but also because of the individual cases involved. In particular, private schools and universities eagerly awaited the outcome of the review of the High School of Dundee and University of Dundee.
Rolling review of charitable status
All charities that were in existence at the time the Charities and Trustee Investment (Scotland) Act 2005 (“the 2005 Act”) came into force were automatically added to the Scottish Charity Register (“the Register”). OSCR has a statutory duty under the 2005 Act to keep the Register up to date. Rolling review is the process under which OSCR will systematically review all these charities to determine whether or not they meet the new charity test as set out in the 2005 Act and should remain on the Register.
Following a consultation period with the charity sector, OSCR carried out a test run of the rolling review process on a representative range of charities which volunteered for the process. These included Pollockshaw’s Methodist Church in Glasgow, the John Wheatley College in Glasgow, the High School of Dundee, the University of Dundee, the Voluntary Action Fund, Coalburn Miners Welfare Charitable Society and East Riggs and Dornoch Childrens Gala Fund.
Results of the rolling review pilot
The results of the pilot show that OSCR is satisfied that each charity has passed the public benefit test. Fourteen charities also met the charity test and two of the charities, namely the John Wheatley College and the Voluntary Action Fund were issued with directions regarding technical matters in their constitutions. Failure to implement these directions within the agreed timescales will result in their removal from the Register.
OSCR has stated quite clearly in its report that each charity has been assessed on its individual merits. At this stage, the pilot cannot be taken as providing “definitive benchmarks, although over time we will be able to identify trends and patterns”. We can however use the pilot to examine how OSCR has applied the charity test in each case, and the factors that were taken into account.
What is the charity test?
The test set out in the 2005 Act can be summarised as follows:-
The charity’s activities must fall into one or more of the fifteen charitable purposes set out in section 7 of the 2005 Act.
The charity’s constitution must not contain any non charitable purposes. For example, any winding up clause must make provision for the assets of the charity to be transferred to a charitable body having similar objects. It should not make provision for control or direction by Ministers. Finally, the charity must not be a political party or support any political party.
The charity must be for the benefit of the public, in Scotland or elsewhere. This is a complicated test, and OSCR will take into account factors such as the extent of any public benefit provided when weighed against any private benefits received by the members of the charity or disbenefit that results from the charity’s activities. OSCR must also consider whether there are any unduly restrictive conditions, such as charges or fees levied by the charity in order to obtain the benefits of the charity.
The High School of Dundee and the University of Dundee
OSCR described the review of the High School of Dundee as being “the most complex and challenging”. Both it and Dundee University are fee paying institutions where the students are selected on the basis of their academic skills and ability. OSCR has taken the view that some benefits, such as education, are by their very nature expensive for charities to provide and that they must be able to cover the costs of providing such benefits by charging fees. The test is not whether there are any charges or fees, but whether or not these charges or fees are unduly or excessively restrictive. This is a complicated test to apply and it is outside the scope of this ezine to look at the criteria applied by OSCR in any detail.
OSCR was satisfied that the fees charged by both charities were not unduly restrictive, commenting in the case of the University that the majority of students did not pay a fee which reflected the full cost of the overall benefits provided. Both charities provided students and the general public with information on the availability of bursaries. They also gave public access to their facilities, such as buildings or sports facilities (whether free or for a charge). OSCR also decided that choosing beneficiaries on the basis of academic skill is both justifiable and reasonable in the context of the educational objects of each charity.
The John Wheatley College
OSCR has also provided some useful guidance on what it considers to be ministerial control under the 2005 Act in its review of The John Wheatley College. It determined that the college had exclusively charitable purposes and provided a public benefit, but did not meet the charity test because its constitution makes provision for Scottish Ministers or a Minister of the Crown to direct or control its activities. OSCR therefore issued directions to the college as to how its constitution ought to be changed so that it meets the Charity Test. These changes will necessitate amendments being made to the Further and Higher Education (Scotland) Act 1992, as amended. OSCR has therefore notified Scottish Ministers of its interpretation of “ministerial control” and the test that will be applied to all Further Education Colleges, and has allowed the college two years to resolve the issue via the usual parliamentary process.
Conclusion
Although the report is not to be regarded as a benchmark, it does provide a useful starting point for all existing charities that face the forthcoming rolling review process. Rolling review itself will commence in several stages from September 2007. OSCR has already identified the charities that it intends to review first.
Although the guidelines will become clearer over time, we are pleased to advise any charity now which has any concerns, or which would like to discuss the results of the pilot review further.
If you would like assistance or more information please do not hesitate to contact our Head of Charities, Anne Swarbrick or Victoria Simpson, Associate.
|
