Watchdog to monitor Shetland Charitable Trust amid discontent over conflicts of interest

Scotland’s charity watchdog has placed Shetland Charitable Trust under intense surveillance and may stop it conducting business if councillor-trustees are seen to have any more conflicts of interest.

OSCR cautioned the trust that any “inappropriate” practices or actions relating to councillor-trustees’ dual roles could prompt intervention, perhaps to restrict the trust’s ability to spend or receive income or to suspend any trustee or trust employee.

The unprecedented action, which will damage the trust’s reputation, is in reaction to its tortoise-speed approach to ending councillors’ stranglehold over the charity which has up to 22 councillors and only two appointed independents.

OSCR has already invoked its considerable powers to demand advance notice of all future trust meetings, copies of agendas and reports, draft and final minutes of every session, plus an explanation of how councillors deal with each potential conflict of interest as it emerges. A warning has been added that a team from OSCR may turn up at any future trust meeting.

Trustees are due to discuss the unprecedented threat to their freedoms at a meeting on Wednesday.

Their specialist lawyers Turcan Connell have advised them of the seriousness of the threat of action from OSCR if they are perceived to be in breach of statutory rules on conflicts of interest. Simon Mackintosh of Turcan Connell warned that the practical effect of OSCR’s monitoring regime “should not be underestimated”.

“The action which OSCR could take includes (in the case of misconduct) suspending a trustee or senior manager responsible for, or privy to, the misconduct or who has contributed to, or facilitated it, or who appears to be unable to, or unfit to, perform their functions in relation to the charity.”

OSCR’s heightened scrutiny follows February’s decision by the trustees to reject their own constitution reform proposals, which had taken a year to formulate. They agreed to put the matter off until after the next council elections in 2012, although it was agreed talks could continue in the meantime. The tactic effectively stuck two fingers up to OSCR and people in Shetland who have been calling for reform. The inaction was approved by the trust despite warnings from some trustees about the possible consequences.

The proposal they rejected was to replace the current format with 15 trustees made up of eight councillors and seven people selected from the community.

In a private meeting with trustees in June, OSCR made it clear that delaying change for two years was unacceptable. In the absence of progress it said there remained “a real risk both of systemic and specific conflict” which would impact on the trust’s ability to perform effectively and appropriately.

OSCR highlighted the need to address the problem of how the trust is perceived by others when making its decisions. In a letter to trust chairman Bill Manson in July the regulator said: “It is not solely about the way in which a decision is arrived at, but also about how the decision-making process and practice appears to others outwith the trustee body.”

OSCR’s head of inquiry and investigation Laura Anderson again implored the trust to “move forward to adopt different, less high-risk and more appropriate governance arrangements”.

Meanwhile, two anonymous complaints to OSCR from people in Shetland relating to the trust’s discussion of Viking Energy affairs in 2008 and 2009 have been rejected by the watchdog, partly because at the time it did not have proper procedures in place for taking action.

In one case the complaint about trustees deciding to invest in Viking was deemed inappropriate for OSCR to get involved with. “It appears to OSCR that the decision … was within the trust’s powers. OSCR does not have the discretion to overrule a charity’s decision, validly taken within its powers, on the grounds that others take a different view, however strongly held.”

The other complaint was similarly put to bed without recourse to action because “there does not appear to be sufficient evidence that the charity trustees who are also councillors acted in a way that resulted in the interests of the trust not being represented”.