Charities watchdog to be set up after fundraising scandal

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AN INDEPENDENT regulator with sweeping powers to monitor and investigate charities will be appointed by the end of the year, Scotland on Sunday can reveal.

The move has been ordered by ministers just days after it emerged that Paisley-based Breast Cancer Research (Scotland) had received income of 13m in seven years but passed only 1.5m to charitable causes.

The charity’s bank accounts have been frozen after allegations that the group’s fundraiser, Tony Freeman, from Glasgow, received about 8m in commission.

A critic of Scotland’s charity system last night claimed the scandal had been "waiting to happen" as a result of Scotland’s lax charity laws.

The new watchdog, which has provisionally been called the Office of the Scottish Charity Regulator (OSCR), will require all charities to register with it.

At present, charities only have to register with the Inland Revenue if they want to qualify for tax breaks. Any organisation which does not apply for tax relief can still operate as a charity without the need to be registered anywhere.

Compulsory registration with the new OSCR will also require all charities to submit a full annual report and accounts. This will be crucial to giving the new body the chance to monitor their activities.

At present, charities are only investigated when the Scottish Charities Office receives a complaint or has reason to suspect something is amiss.

The new body - which will cost 1m a year to run - will have the legal power to launch a full investigation into any charity without necessarily having grounds for suspicion.

A spokeswoman for the Scottish Executive last night confirmed they intended to appoint a regulator by the end of 2003 and set up the office of the regulator early in 2004.

She said that the decision had been taken in response to the McFadden Commission Report, which was published in April 2001 and which reviewed the state of Scottish charity law.

Denying that the timing had anything to do with last week’s court case, she said that ministers had been intending to bring in the new rules since last year, but had been unable to announce a date because of the Scottish elections.

She said: "It has been the intention for some time to establish the regulator and the office. Due to the election period, it was not possible to set a firm date because it was not known who would actually be in office. Now we are in a position to make a date known."

The regulator will be able to begin work immediately because the powers to demand accounts and annual reports will not need new legislation, the spokeswoman added.

In addition to the regulator, ministers are committed to bringing in a charity bill to update Scotland’s charity law, which is based on an act passed in 1601.

The bill will allow the details and accounts of all Scottish charities to be put on the internet so they can be easily inspected.

However, Tricia Marwick, an SNP list MSP for Mid-Scotland and Fife, last night said that the reform was "long overdue".

Marwick, formerly the public affairs officer with the Scottish housing charity Shelter, said: "This is something which was urgently needed four years ago at the beginning of the first Scottish parliament. It is a scandal that it has taken until now for ministers to move.

"I planned to table a charity law bill when I first came to the Scottish parliament in 1999, and was talked out of it on the basis that the Executive were due to introduce one ‘imminently’. That never happened."

Commenting on the Breast Cancer Research (Scotland) case, she said: "This was a disaster waiting to happen. The lax state of our laws mean they are full of loopholes and they are a charter for people who will abuse the generosity of the Scottish people."

Marwick also hit out at charities which employ people to raise cash for charities by cold-calling or stopping people in the street.

She said: "What you have to be careful of is that in many cases not all the money you think you are giving to the charity will actually go to the good causes.

"Many charities employ outside agencies to raise cash on the streets or door-to-door, and some of them take a commission."

Charity is big business in Scotland. It is estimated Scots donate more than 300m a year to good causes, both domestic and international.

Last Friday’s court case highlighted the controversial role of professional fundraisers.

The charity used the services of Glasgow fundraiser Tony Freeman, who was allegedly paid about 60% of the cash raised - some 8m - in commission.

Freeman drives a Jaguar with a personalised number plate and has a flat in a plush area in the south side of Glasgow.

In the past, he has claimed to be "squeaky clean". He has allegedly said: "I have been investigated and have nothing to worry about from the police."

However, in its submission to the Court of Session, the Scottish Charities Office claimed that the charity had been "used as a vehicle for Mr Freeman and Solutions RMC [Freeman’s business] to collect money and charge excessive commission".

In addition to freezing the charity’s accounts, the judge - Lord Drummond Young - suspended Freeman and three trustees from any role in the organisation.

Charity commissioners in England have already frozen the accounts of Breast Cancer Relief, based in Lancashire, because they feared that a "considerable" sum of money was to be transferred to Freeman’s company.

The Scottish Charities Office has petitioned the Court of Session to have Freeman, his company and the trustees removed from any involvement with Breast Cancer Research (Scotland).

They have all been given time to lodge their defences with the court.