Promoting charity accountability: Understanding disclosure of serious incidents

Dr Diarmuid McDonnell and Dr Alasdair Rutherford from the Faculty of Social Sciences, University of Stirling are the winners of the 2017 Campbell Adamson Memorial Prize, awarded at the NCVO Voluntary Sector and Volunteering Research Conference in September this year.

Charities are under increasing pressure to demonstrate accountability for their conduct; however, this must be balanced with the risk of placing an undue burden on them. Advances in big data enable us to understand accountability practices and regulatory demands in new and revealing ways.

In our work we employ a novel dataset in order to understand the types of serious incidents charities report to the Scottish Charity Regulator. Revealing patterns in the reporting of these incidents enables regulators to target their scarce resources more efficiently, supports better public understanding of the nature of risk in the sector, and reminds charities that they are not alone in dealing with serious incidents and issues.

The following key insights emerged from analysing the first year of serious incident reporting in Scotland.

Key finding 1: Financial loss, fraud/theft, and personal behaviour most common incidents reported.

OSCR has received reports from 94 charities concerning 115 serious incidents (less than 1% of charities active between April 2016 and March 2017).

Key finding 2: There is a clear link between the type of incident and the regulator’s response.

For 20 charities OSCR deems that the reported incident could potentially lead to the demise of the organisation (ie a wind up); twelve of these concerned financial loss. Reports concerning fraud and theft, and personal behaviour most commonly result in OSCR requiring further reporting, but these incidents have not been considered by the regulator to threaten the continued operation of the charity.

Figure 1. Reported serious incidents and regulator response

Key finding 3: Regulator identifies a greater risk of organisational demise for smaller charities.

Figure 2 shows the distribution of serious incidents by charity age and size. Fraud and theft, and financial loss are fairly widely distributed across different types of charity, while personal behaviour is concentrated amongst the largest, oldest organisations. Charities of below-average size (using the mean) and average age are most susceptible to incidents that might lead to the demise of the organisation.

Figure 2. Distribution of serious incidents, by charity age and size

Key finding 4: Larger, older charities previously subject to a regulatory investigation more likely to report.

Charities that have been investigated by OSCR – in response to a concern raised by a member of the public, for example – in the previous two years are more likely to report. This may indicate external pressure to report or it may be evidence that certain types of charities are more susceptible to experiencing incidents worth reporting to the regulator.

Serious Incidents and Accountability

Charities can be reassured by the wide distribution of serious incidents recorded across the sector, and that they are not singled-out by reporting a serious incident. Our comparison with the reporting rate in England and Wales suggests charities need to engage more in demonstrating accountability for experiencing and managing risks and serious incidents, and this is where professional advisors could play more of a role.

Under-reporting may be due to ignorance of the Notifiable Events scheme amongst some charities, or uncertainty about what constitutes a serious incident. Ten of the incidents in the data were nothing more than requests for clarification on reporting, none of which led to further regulatory response. This suggests that charities need a clearer understanding of the scheme, and both the regulator and charities’ advisors have an important role in supporting organisations to engage with the regulator in this way.

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