1.6 No changes are proposed for the existing Registered Charity containing the Common Good Funds.

Transcription

1 ITEM 14 Charity Funds Reorganisation. Report by the Chief Financial Officer Scottish Borders Council 30 January PURPOSE AND SUMMARY 1.1 The purpose of this report is to seek approval for a series of actions, which will clarify and simplify the management of Council Charity Funds, modernise the purposes of these funds and improve the access by local communities to such funds, many of which have not been accessed for a number of years. 1.2 Under current Scottish Local Authority and Scottish Charity Regulations all Charities, the Trustees of which are exclusively elected members of the Council, will each have to be subject to a full external audit of their accounts for the year to 31 March 2014 unless they are in the process of being wound up and subsequently reorganised. 1.3 The report seeks approval for the formation of 3 new Council Charities relating to the relief of poverty, Education and Community Enhancement, which will enable the existing Council Charity Funds to be reorganised into them. Following reorganisation the existing Charity Funds could be wound up. Accordingly it is planned to apply to the Office of the Scottish Charity Regulator (OSCR) to wind up the Council s existing Non common Good Charity Funds by 31 March The funds held by each of the 3 new Charities would be held in discrete Restricted Funds the operational control of which would it is proposed be delegated to elected members on a geographical basis. 1.5 In order to improve the use of funds held by the Council, which are not currently one of the registered as charities and have outdated purposes a review of those funds will be undertaken and where appropriate reorganizational activity will be undertaken to transfer the funds into the appropriate New Charity. 1.6 No changes are proposed for the existing Registered Charity containing the Common Good Funds. 2 RECOMMENDATIONS 2.1 It is recommended that the Council approves (a) the establishment and registration of three new Charities, each having all of the elected members of the Council as Trustees and having the purpose of 1

2 (1) the advancement of education and cultural exchange; (2) the prevention or relief of poverty, the relief of those in need by reason of age, ill-health, disability, financial hardship or other disadvantage and the advancement of health: and, (3) Community enhancement including the advancement of the arts, heritage, culture or science, the upkeep of heritage assets and the provision of recreational facilities, or the organisation of recreational activities, with the object of improving the conditions of life for the persons for whom the facilities or activities are primarily intended. (b) the reorganisation of the existing Council Charity Funds, excluding the Common Good Charity Fund, into one of the new Charities as above. (c) the winding up of the existing Council Charity Funds, excluding the Common Good Fund Charity, following their successful reorganisation. (d) the use of engagement from external legal services since the current work priorities in the SBC Legal Services section will not permit the proposed actions to be completed by the end of March (e) the ongoing review and if appropriate reorganisation of the unregistered Funds into the appropriate New Charity. (f) and requests a further report including internal governance arrangements on completion of this work. 2

3 3 BACKGROUND 3.1 Prior to the setting up of the OSCR all bodies in Scotland which wanted to take advantage of tax legislation and other cost reductions beneficial to charities, had to register with the Inland Revenue as charities. Previous Town, County, District and Regional Councils operating within the Borders had at various times taken advantage of this facility and between them some 112 different Trusts, Endowments, Funds and Bequests had been registered as Charities with the Inland Revenue out of a total of 289 such structures now managed by this Council. However there is no apparent strategy applied to determine those funds which were so registered. When OSCR was set up the Inland Revenue passed over to OSCR the information on bodies registered with them as Charities and those bodies were then all adopted as Scottish Charities Registered with OSCR, although many of these Charities appear not to have OSCR compliant constitutions or eligible charitable purposes. 3.2 Charities, whose Trustees are exclusively elected members of the Council, are bound by the regulations issued under both the Local Authority (Scotland) Act 1973 and the Charities and Trustee Investment (Scotland) Act Under these regulations each Registered Charity will have to have its Annual Accounts subject to a full audit no matter the size of the Charity for the financial year ended on 31 March However Audit Scotland and OSCR have agreed that there will be no audit requirement if an application has been made to wind a charity up prior to 31 March In order to wind up any of the existing SBC managed Charities there has to be a suitable Charity into which the funds can be transferred through a reorganisation and thereafter held therein as a Restricted Fund ie a fund held for a clear identified purpose. 3.4 The Charities held by the Council are set out in Appendix 1 to this report and are grouped by Council Ward and general Charitable Purpose and Appendix 2 sets out in a similar way the funds which are held but are not Charities. 3.5 Many of the Funds are very restrictive in their use and are effectively moribund as they cannot now be used for the initially detailed purpose. In several cases for specific geographic areas a number of different funds exist that provide benefit for the same purpose. 3.6 The current charities hold funds in the main for the following purposes:- Educational prizes and bursaries Welfare and the relief of poverty Heritage, memorials, environment and grave maintenance. 3

4 4 CREATION OF NEW CHARITIES AND REORGANISATION OF EXISTING CHARITIES 4.1 In order to both make the management of and access to the current charity funds easier, and reduce ongoing running costs including future external audit costs, it is proposed to rationalise the current funds held as registered charities into three new registered charities. 4.2 This will permit the Council to update the purposes for which the funds are held so that whilst they will be similar to those currently in place they will be expressed in modern language and be compliant with OSCR s charity test, so improving access to these funds by the public. 4.3 The management of each of the three new charities will be along the following lines, with all Councillors being Trustees of each charity. For the two Charities whose purposes are detailed in 2.1(a) 2 and 3 above the activities of each fund transferred into each charity will be delegated to Chief Financial Officer in consultation with the councillors of the areas covered by the original fund. For the Charity whose purpose is the advancement of education the activities will be delegated in the same way as is applicable to the current Education Trusts and Funds. In this way the original general purpose and geographic restriction intended by the donor will be respected. 4.4 The activity outlines above will require immediate legal assistance and whilst this would normally be obtained from the Council s Legal Service it is accepted that existing work priorities currently precludes them from meeting the required timescales. It is therefore proposed to engage an external legal service with the appropriate skills in establishing charities, at a cost of between 5,000 and 10,000 to be funded from the existing external Audit budget. 5 REORGANISATION OF OTHER FUNDS HELD AND NOT REGISTERED AS CHARITIES 5.1 Upon rationalisation of the existing charities the opportunity will also be taken to review the remaining 177 separate Trusts, Endowments, Funds and Bequests managed by this Council. 5.2 Whilst the potential cost of external audit is not applicable to these funds they still require rationalisation to reduce their running costs and make them more accessible to the public and relevant to the 21 st Century rather than times when they were originally set up. 5.3 The route to achieve this objective is currently being investigated and it is proposed that a review of these funds and appropriate rationalisation 4

5 should follow on from the activities outlined in section 4 above. 6 IMPLICATIONS 6.1 Financial There are no financial implications, other than those explained above in Sections 3, 4 and Risk and Mitigations No significant risk to the financial position of the charity funds is identified. 6.3 Equalities It is anticipated that there are no adverse equality implications arising from the proposals contained in this report. 6.4 Acting Sustainably Whilst there are no economic, social or environmental effects arising from the proposals contained in this report, there should be easier access to funds by beneficiaries, which will impact upon the economic, social and environment of the Borders. The clarified administration and fund amalgamations should produce more sustainable Funds. 6.5 Changes to Scheme of Administration or Scheme of Delegation There are no changes required to the Scheme of Administration or Scheme of delegation arising from the proposals contained in this report. 7 CONSULTATION 7.1 The Head of Corporate Governance, the Head of Strategic Policy, the Head of Audit and Risk, the HR Manager and the Clerk to the Council have been consulted and their appropriate comments have been incorporated into this report. Approved by David Robertson - Chief Financial Officer Signature Author(s) Name Designation and Contact Number Andrew R S Mitchell Senior Financial Analyst, Financial Services Extn 5974 Background Papers: Previous Minute Reference: 5

6 Note You can get this document on tape, in Braille, large print and various computer formats by contacting the address below. Andrew Mitchell can also give information on other language translations as well as providing additional copies. Contact us at Andrew Mitchell, Senior Financial Analyst, Financial Services, Council Headquarters, Newtown St Boswells, Melrose, TD6 0SA. Tel: Extn 5974 Fax: , 6