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I ask Rebecca Reid to come in.

On the first question, the new power is not being proposed with a view to its being used a certain number of times; it is more a case of ensuring that the regulator has appropriate remedies to support its important inquiry work, where those are needed. A positive direction would be issued only following an inquiry and where the circumstances of the case required formal action to be taken because OSCR had reached the view that there had been misconduct in the charity or that it was necessary for it to act to protect charitable property. Of course, OSCR is required to publish a report when any direction is made.

I think that the power is unlikely to be used frequently. The annual report for 2021-22 shows that, in that year, OSCR opened 60 new inquiries about charities and closed 99 inquiry cases. There was one incidence of regulatory powers being used, and a third of inquiry cases closed with recommendations or guidance to trustees. That is the context to what we are talking about.

On your second question, there are a number of areas in which OSCR anticipates using a positive power of direction. Those include directions to appoint additional trustees to form a quorum or to meet a minimum number that is specified in a governing document; to take a specific action in line with the charity’s governing document, such as holding an annual general meeting to make a specific decision; to take action to remove a trustee in line with the powers that they have; to manage a conflict of interest effectively and demonstrably; and to prepare and submit a compliant statement of accounts.

Non-compliance with a positive direction would be classed as trustee misconduct, and OSCR would be able to take enforcement action against the trustees, taking into account the specifics of any case.

The financial memorandum sets out the additional costs and resource that OSCR itself has forecast for implementation of the bill. Most of those relate to OSCR’s staff costs to enable it to carry out communications and engagement activities—we talked earlier about the importance of that aspect—to provide support to charities and other stakeholders, and to process casework.

Funding for OSCR more generally will be negotiated in the usual way, taking into account the projected costs of its functions at that time. In line with the standard practice for budget forecasting, the additional staff costs have been calculated on the assumption of 3 per cent annual uplifts to salary figures for 2021-22.

I met the chair and the chief executive of OSCR in February, and funding was discussed. The financial situation is challenging across the whole public sector, and OSCR is not being treated any differently in that regard. Officials are in regular contact with OSCR about its resourcing requirements. We agreed that we would keep a watching brief over its financial resilience, and those discussions with OSCR will continue, but I do not anticipate any particular challenges around any additional costs arising from the bill.

Yes. The financial memorandum sets out the estimated costs of developing the database for the internal schedule of charity trustees as well as the on-going maintenance of the database. OSCR has made and will continue to make that important investment as part of its delivery.

I acknowledge that there is an appetite for a wider review of the charity sector, but I thought that it was important to move forward, as we were ready to do, with some of the technical aspects that had already been consulted on.

Once scrutiny of the bill under the parliamentary process is completed, it will be important for us to scope what the wider review should look like, together with SCVO and the sector more widely. There will be varying views on the scope of the review and on what should be covered, and I am open-minded on that. I think that the role of SCVO will be critical. I have discussed the matter directly with SCVO; as you can imagine, it has raised it with me directly. The Parliament will have a view, and the committee will have a view about its scope, too.

Given that some aspects of the proposals have been somewhat delayed because of the pandemic, it is important to progress the bill, and we should then consider the wider review. Whether that review throws up the need for further legislation remains to be seen, and I am open-minded about its scope, as I have said.

Again, I am open-minded on that. There are pros and cons around that, but I have not come to any fixed view on it. That is open for further discussion and consideration.

There has been extensive consultation, including with a number of small organisations. The bill has been the subject of two 12-week consultations and there is a total of, I think, more than 400 written responses from bodies of all sizes, including a number of small organisations.

The question whether things have been included in the bill comes back to the need for a wider review, in which there will be scope to consider those things. I want to take the time with the sector, including small organisations, to scope out what that wider review would cover, because there are differing views on that. It is important to have a really full, open discussion with all aspects of the sector, including large and small organisations.

Allowing an exemption for smaller charities from the requirement to publish accounts or to provide information to OSCR would, I think, defeat the aim of ensuring transparency and accountability across the whole sector. More than half of charities in the sector have an income of less than £25,000 and are therefore considered to be small charities. That is a huge part of the sector, and an exemption would potentially mean that the public and the regulator would not have access to a large proportion of it.

In practice, the situation will be very similar to what it currently is. OSCR already publishes the redacted accounts of charities with an income of more than £25,000, and financial reporting to OSCR is already staggered depending on income levels, with smaller charities providing less information than larger ones. The point that I was getting at earlier was that OSCR already takes that into account with regard to the requirement for financial reporting. It is proportionate to the size of the organisation; one would expect a multimillion-pound charity to be required to provide a greater level of financial information.

The audit threshold for charities in Scotland and Northern Ireland is currently set at £500,000. In England and Wales, the threshold is higher, at £1 million. However, I think that the view is that £500,000 is right for Scotland, given that the incomes of charities in Scotland are a bit different from those in England, and that it is appropriate that that remains the threshold.

I believe so. I can bring in Caroline Monk to talk more about the detail. The consultation with the ICO happened at quite an early stage in the process and we are content that the points that were raised have been addressed.

I am delighted to have the opportunity to speak to you about the Charities (Regulation and Administration) (Scotland) Bill. The committee will be aware, from its evidence sessions so far, that there is significant support for the bill and for the modernisation of Scottish charity law.

The bill is built around proposals that have been put forward by the Office of the Scottish Charity Regulator—OSCR—that are based on its operational experience since the Charities and Trustee Investment (Scotland) Act 2005 came into force. In addition to the OSCR proposals, and following engagement with OSCR and the Law Society of Scotland, the record of charity mergers at section 12 and a list of minor or technical amendments to the 2005 act were added to the bill. The bill was delayed due to the pandemic, so I am pleased that we are now able to progress it.

The bill covers a range of different provisions that are designed to enhance the existing framework. Each of the provisions falls under one of three primary aims, which I will outline briefly.

The first aim is to increase transparency and accountability in charities by improving public access to information about a charity’s operations. The bill will require OSCR to publish the accounts for all charities and to include the names of charity trustees on the Scottish charity register. OSCR will be able to maintain a schedule of charity trustees’ details for its own internal use and provide a publicly searchable record of trustees who have been removed from office by the courts.

The second aim is to provide stronger powers for OSCR, including the power to issue positive directions to help charities to address regulatory issues. The bill will give OSCR a new power to issue positive directions to charities, in addition to its existing powers to issue preventative directions. It will also allow OSCR to conduct inquiries into former charities and their trustees.

OSCR’s powers and duties in connection with the register will be enhanced by enabling it to remove a charity from the register when that charity fails to provide accounts and is unresponsive to attempts by OSCR to make contact. In addition, there is a new provision that will require OSCR to refuse to enter an applicant charity on the register when it considers that it would not be appropriate to regulate the applicant because the charity has no, or only a negligible, connection to Scotland.

OSCR will be empowered to appoint interim trustees to a charity in certain circumstances—for example, when the charity has no trustees or the existing trustees cannot be found. Further, the bill will make some adjustments to OSCR’s processes around gathering information in connection with inquiries to make those processes more streamlined and efficient.

The third aim of the bill is to bring Scottish charity law up to date with some key aspects of charity regulation in England, Wales and Northern Ireland, thereby enhancing public trust in charities and further protecting charitable assets. That will be achieved through updates to the criteria that apply to the disqualification of charity trustees and the extension of disqualification to individuals who are employed in charities who exercise senior management functions. The bill will enhance protection for charitable assets through the creation of a record of charity mergers and a new provision for redirecting legacies from a charity that has merged and ceased to exist to the charity with which it has merged.

The bill will make practical improvements and updates to existing charity regulation and the role of OSCR. We consulted on those aspects pre-pandemic, and we are now taking them forward.

I believe that there is also a need for a broader review of the future of charity regulation, which is why I have committed to begin such a review following the passage of the bill. We will ensure that we engage with the charity sector on the scope of that review.

I am happy to take questions, convener.